If your network is safe, you can just go ahead and go plain text ...
I'm presuming that you have an entry in server1's /etc/hosts for server2 :
Code:
192.168.x.x server2
When you connect to your DB in a PHP page :
Code:
$Session = mysql_connect(server2, Your_MySQL_User, Your_password) or die (Error_Message);
Be sure to allow connection to your MySQL DB from that user/host combination ...
Edit :
To allow your user from another host, use the GRANT syntax.
This will add the appropriate entry to you mysql.db table