Ok, I don't want to tie anything to a particular technology, but authentication does not require a password to be transmitted. Only proof of being the owner of the identity. Such systems are called zero knowledge authentication systems. Its not "combine different ideas together/buzz words". But I appreciate your indignation. It means you do really care about bitcoin's success and I welcome your input.

http://en.wikipedia.org/wiki/Zero-knowledge_password_proof


Many authentication systems exist that never see a user's password due to public/private encryption.

Essentially works like this:
User has a private key.
Server sends a challenge.
user signs the challenge with his private key
server reads the signed challenge and verifies using the clients public key.

Once identity is established, the client can perform all operations until the session expires.

Blockchain.info uses zero knowledge authentication, as do wuala, spideroak, clipperz, etc.