…Jakob Nielsen thinks so:
“Usability suffers when users type in passwords and the only feedback they get is a row of bullets. Typically, masking passwords doesn’t even increase security, but it does cost you business due to login failures. Password masking has become common for no reasons other than (a) it’s easy to do, and (b) it was the default in the Web’s early days.”
It’s certainly true that this has never really been challenged – we always do it without thinking.