Ubuntu has moved to implement strong encryption such as ecryptfs and encrypted /home directories and even whole-disk encryption. This is a positive development and much appreciated.
However (and I know I will get those who disagree, seeing another proposal) the fact that one does not have the option to see the passphrase one enters as plaintext in my view tends to lessen security. To maximize security, one should employ passphrases which approach the cryptographic strength of the algorithms used, which--depending on the key size, requires passphrases equivalent to 20 random characters (for 128-bit key sizes) up to 37 (for 256-bit). The fact that most user-generated passphrases aren't random means that it's a good idea to go even longer.
Now, it is quite possible to remember long random-looking passphrases, utilizing upper- and lower-case keys and including letters, numbers, and symbols that would resist dictionary attacks. Typing them in reliably to do things like unlock a screensaver when all one sees is a line of '*****'s is another matter. Often I have to type my passphrases in a number of times before I type them in correctly. And I know my passphrasses aren't as long as the cipher would suggest they need to be. In brief, I believe that showing the user only lines of '*****'s tends to drive them towards using shorter and cryptographically weaker passphrases than they might ordinarily use. I know I would use longer passphrases if this were so.
Now--let me deal with the objections to this proposal. One would be that anyone else looking over one's shoulder would be able to see the passphrase if the user selected the "display passphrase" option. My answer to this is that the use of "****"s for passphrases evolved from a time when encryption was not used, and where users usually used weak passphrases like "SuzieQ". Yes, it is easily possible for a casual onlooker to see and remember someone typing "SuzieQ". It is another thing for the same casual onlooker to remember 30-odd random characters of what appears to be utter gibberish. The threat from the casual onlooker is thus overstated.
As for the other threats that having a "Display Password" option would supposedly present, they are specious. Yes, I suppose that someone who had unobserved access to the room where one's desktop sits could install a remote camera to capture the user entering a displayable passphrase. But if one had that access, it would be so much easier just to install a hardware keylogger and capture the passphrase that way. In fact, a keylogger would capture the passphrase whether or not it was displayed or not, illustrating how weak a defense utilizing those "****"s are.
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