The terminal has a feature called "local echo". When you type something, it goes to the application (almost always its stdin file descriptor, but it can open /

The terminal has a feature called "local echo". When you type something, it goes to the application (almost always its stdin file descriptor, but it can open /dev/tty and read that too). When local echo is enabled, the terminal also prints what you type. Applications that prompt for passwords simply (temporarily) disable local echo.