Ubuntu Security :: Disable Tunneled Clear Text Passwords

Nov 13, 2010

The ubuntu installation came with my ubuntu (it does not matter which version etc.) Contains sshd_config file with this interesting lines:
# Change to no to disable tunneled clear text passwords
#PasswordAuthentication yes

The same lines are seen in many Ubuntu-related internet pages. This is quite surprising to see.
This seem to contradict to the fact that ssh was created specially to provide authentication (with passwords, of couse) but without sending them by internet as clear text like previous programs did. But I could not find any clear confirmations of that neither in Kubuntu-related documents no anywhere else. I put below fragment of a document from RedHat. This seem to imply that if one will use two "yes", the passwords will be passed in encripted form (and this is what is recommended by RedHat). Is that true? Is this true for Ubuntu too? Is the quoted line from sshd_config wrong? Or incomplete?

[URL] RSAAuthentication yes
The option RSAAuthentication specifies whether to try RSA authentication. This option must be set to yes for better security in your sessions. RSA use public and private key pairs created with the ssh-keygen1utility for authentication purposes.
PasswordAuthentication yes
The option PasswordAuthentication specifies whether we should use password-based authentication. For strong security, this option must always be set to yes.

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[code]...

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