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Intruders get passwords in various ways. These are some of the most popular methods being used by the hackers nowadays:
Sniffing: Data passing on Ethernet or Wireless networks can usually be intercepted. This is done by making use of a protocol analyzer, which sets the network card to promiscuous mode - meaning that it is able to pass all data on the network to the operating system without filtering. Passwords are typically “sniffed” off clear text protocols. Such protocols include Pop3, FTP and Telnet. In these cases passwords flow through the network without making use of any encryption. Many new protocols now make use of encryption. Although encryption makes the task of sniffing passwords more difficult, it is still possible to get the passwords from the encrypted data by making use of Dictionary and Brute force attacks.
Sniffing is a very effective method for hackers and attackers since it is usually a passive attack and therefore more stealthy and more difficult to detect.
Replay attack: In some cases, intruders do not need to decrypt the password. They can use the encrypted form instead in order to login to systems. Tools are also available to make this kind of attack easier. This kind of attack is very popular against web applications.
Password file stealing: System passwords are usually stored in files or in the Windows registry. On Windows NT 2000 and XP, the passwords are stored in encrypted form on the SAM file. On UNIX systems the password is usually stored in the /etc/passwd or /etc/shadow. Once an attacker gets his hand on the password file he can launch a dictionary or brute force attack against the encrypted passwords.
Observation: A very well known and traditional password stealing attack is dubbed “shoulder surfing” - which is basically when an intruder watches someone type in a password. Observation can also be done by going through a victim’s personal objects. Typically passwords are written on small pieces of paper - and can also be written on sticky notes attached to the monitor itself!
Social Engineering: Many successful hackers and attackers make use of human weaknesses - one such well-known hacker is Kevin Mitnick. A common (successful) technique is to simply call the user and say, “Hi, this is Bob from Some-Company. We have problems within the network and they appear to be coming from your machine. Can you give me your password?” Many users will happily supply this sensitive information without thinking twice.
Default Passwords: Sometimes it is not even required to guess the passwords, since the system would have default passwords put in by the system vendor. A lot of network devices such as switches and hardware routers will have default passwords allowing an attacker to easily gain access.

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