With "password" authentication method, the password is not transmitted to the remote server. (AFAIK) However, all modern sshds (AFAIK, at least OpenSSH) defaul

With "password" authentication method, the password is not transmitted to the remote server. (AFAIK) However, all modern sshds (AFAIK, at least OpenSSH) default to (publickey, keyboard-interactive). As the name says, keyboard-interactive sends your keystrokes, one at a time (bar buffering) to the remote server. This is required, for example, when using PAM, as PAM requires the actual authentication key.