There are several reasons why this is a security hole.

• Assuming this is not sent over SSL, someone could sniff the traffic and, since this is sent in plaintext, they can see your user's passwords.
• This is usually stored on the user's computer, so someone else with physical access to their machine can get this data.
• Cross-site scripting attacks can often read cookie data and send it somewhere else, thus allowing yet another way to compromise the user's data.

Never fear, these things become second-nature after you work with the Web for a while :)

Cheers,
Ovid

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