...or used a PC on a LAN? Here's how trivially easy it is to capture someone's Hotmail password if you're using a PC on the same network as another user.
Alice reads her emails using Hotmail from work. She sits at her desk, using her work PC, which is free of any spyware or viruses thanks to the friendly IT department of the company she works for. Alice knows to use a complex password that can't be easily guessed, and she doesn't write it on a Post-It note stuck to the side of her monitor. She also makes sure nobody is shoulder surfing whilst she's typing in her password. She signs-on successfully, reads her emails and then makes sure she signs out of Hotmail before closing down her browser. Nobody else can access Alice's PC.
Bob sits at his PC, which is across the other side of the office from Alice. Bob can't see what Alice is doing on her PC, and can't see what she's typing. But Bob wants to access Alice's Hotmail account because he thinks she fancies him. So, Bob installs ethereal on his PC because he knows it can capture traffic flowing across the network. The company where Alice and Bob works allows users to install software on their own PCs, so he's not broken any company policy.
Bob launches ethereal and sets it to capture traffic during the lunch hour, as that's when he assumes Alice is most likely to read her emails.After the lunch hour is up, Bob stops ethereal from running and saves the log file it produced to a DVD (due to the amount of traffic captured). Bob takes the DVD home with him that night. When he's at home, Bob filters out all the traffic not destined for Alice's PC so that it's more manageable, and then scans all the traffic going to and from Alice's PC. Bob notices that Alice accessed the following URL -
http://login.live.com - which he knows is the sign-on page for Hotmail. He notices that Microsoft don't encrypt the initial sign-on page which means that anything Alice types on that page will be transmitted in clear text. Bob then scans the subsequent packets until he finds Alice's username and password being submitted to Hotmail. Bob then accesses Alice's Hotmail account using her username and password that he obtained, and reads her emails. Bob is upset, however, to discover that Alice is actually a lesbian.
Remember, kids, accessing a sign-on page that is not encrypted means that you are potentially sharing your password with everybody else sat on the same subnet as you.