NOTE: It would be very unlikely a modern system does NOT have shadow passwords set up

How do I enable shadow passwords on my Linux box?

Following is shamelessly stolen fromhttp://www.linux.org/docs/ldp/howto/Security-HOWTO/q-and-a.html

To enable shadow passwords, run pwconv as root, and /etc/shadow should now exist, and be used by applications. If you are using RH 4.2 or above, the PAM modules will automatically adapt to the change from using normal /etc/passwd to shadow passwords without any other change.

Some background: shadow passwords is a mechanism for storing your password in a file other than the normal /etc/passwd file. This has several advantages. The first one is that the shadow file, /etc/shadow, is only readable by root, unlike /etc/passwd, which must remain readable by everyone. The other advantage is that as the administrator, you can enable or disable accounts without everyone knowing the status of other users' accounts.

The /etc/passwd file is then used to store user and group names, used by programs like /bin/ls to map the user ID to the proper user name in a directory listing.

The /etc/shadow file then only contains the user name and his/her password, and perhaps accounting information, like when the account expires, etc.

To enable shadow passwords, run pwconv as root, and /etc/shadow should now exist, and be used by applications. Since you are using RH 4.2 or above, the PAM modules will automatically adapt to the change from using normal /etc/passwd to shadow passwords without any other change.

Convert passwd to shadow