Passwords sent in clear text?
 

I was under the understanding that in ssh passwords were never sent in clear text (as in ssl). This is from sshd_config:
# To disable tunneled clear text passwords, change to no here!
#PasswordAuthentication yes
#PermitEmptyPasswords no

Does this mean you cant have password authentication if you don't want them sent in clear text?!

No. It means you can disable password authentication and use only key-based authentication instead. This way someone trying to connect will not even get a password prompt to try to brute-force unless they have a known key.

Edit: sorry I missed this line:
I have no idea why that is in your sshd_config. ssh does _not_ send passwords in plain text. That is the whole point of ssh, to replace old-school programs like rsh that do...

There's two ways to authenticate, public/private keys or passwords.
By default they are both enabled, you have the option to turn off passwords and that is what PasswordAuthentication does.
If you are authenticating with a password, its still encrypted in the tunnel, I agree the description that says "clear text" is a little misleading. In other words a packet sniffer will not see the password in clear text.

Wow, thats much more than misleading.... If you are right, then the "clear text" statement is absolutely incorrect.

They did include the word "tunneled" in describing the clear text exchange.

The idea is that your credentials are visible to the sshd as clear text (it's reading them after they come out of the tunnel). There have been multiple instances where miscreants compromise a multi-user system and replace the sshd binary with one that logs those tunneled credentials. Using PKI with SSH makes that no longer possible.

I don't think the warning is misleading, perhaps just too much information for folks not familiar with the workings of ssh.