Even though the p@$$words are relayed in plain text I think they cannot be collected by others unless they are broadcasted instead of directed to one IP.[/b]
--anand
Actually the very basic design of an ethernet/LAN says that whatever packet one computer sends out is received by all the computers on the same LAN. But if the packet is not meant for them, they don't see what's inside it by default. This behaviour can be easily changed. On the other hand Broadcast packets are not only recieved by all the computers on the LAN but also processed by them and not dropped, according to default settings.
I think the LAN environment is a highly insecure environment when you don't know most of the people who are on it and there's no security policy thrust upon the whole LAN.