ODBC does not transmit usernames and passwords in clear text (ODBC does not transmit anything) - but some ODBC drivers do. The basic SQL Server driver on Windows does "encrypt" the password and does not send it clear text but it is not that difficult to break.

It has been a while since I looked at it but I thought you could set SQL Server up to only accept encrypted connections and if that is the case there must be a Windows driver which does the encryption. May be I am imagining that.

So long as your client is on UNIX the Easysoft SQL Server ODBC Driver does all forms of SQL Server connections - simple encrypted password (and it is very simple), NTLM (a little better but not much), SSL for the connection only or SSL for everything. Unfortunately it is not available for Windows currently. BTW, I have a connection with Easysoft.