Your best friend for file transfer.Fetch
Fetch displays the warning, "If you do not disconnect, your password will be sent over the network in the clear," whenever you try to send your password unencrypted and insecurely.
There are two reasons you could be receiving this warning.
First, you will always receive this warning when connecting to a server that doesn't support secure connections. Most FTP servers do not support secure connections and require unencrypted passwords, so this warning does not have much value when connecting to them. You may want to contact your service provider or network administrator to see if your server supports secure connections using SFTP or FTP with TLS/SSL; if not, you may want to turn off this warning.
However, if you are connecting to a secure server via SFTP, FTP with TLS/SSL, Kerberos (GSSAPI or KClient), or One-Time Password, this warning may indicate that the secure server isn't working properly and requested a password insecurely, in which case, you may not want to continue connecting. Also, if you usually connect to secure servers, this warning may also indicate you accidentally tried to connect to an insecure server.
Click the Ignore button to continue connecting, or Disconnect to not make the connection.
Consult your service provider or network administrator if you have any question about whether the warning is significant.
You can turn off this warning by unchecking the Warn before sending password insecurely checkbox in the Security Preferences pane.