When an account is created on a unix system, the user chooses a password, This password is encrypted by the computer using special parameters and stored in /etc/passwd.
When the user logs on to a unix system, the system encrypts what was entered as the password, using the previous parameters and compares the encrypted result against what is stored in /etc/passwd. (It would be horribly dangerous to store a plaintext version of the passwd file on the computer)
Because of its historical significance, this particular copy of /etc/passwd was copied, archived, and uploaded to the internet, along with the rest of the sourcecode.
Using an awful lot of computing power, the passwd file has been decrypted to reveal the original passwords that various historical figures used to log onto this machine.
