As you may or may not know, Filezilla, the extremely popular FTP client, stores all of your FTP passwords in plain text on your hard drive. While I strongly disagree with this practice, I also understand that there are reasons not to do so. It would be really nice to have some sort of option to encrypt the passwords, but I don’t see that happening any time in the near future.
There are actually multiple levels of danger in using Filezilla (and, presumably, many other FTP clients). Unlike a Web browser, where, if you choose not to use the password manager none of your passwords are stored; Filezilla still stores all of the details from your most recent connection in a file called filezilla.xml and all of the details from your 10 most recent connections (at least, the ones you make by typing the information into the Filezilla interface; which is the only way to connect if you are not using the Site Manager) in a file called recentservers.xml, even if you choose not to use the Site Manager. These are plain old XML files with all of the information stored in plain, non-encrypted text. The format of the entries looks similar to the following.