/etc/passwd indeed stored the hashes in SVR3, and there was no such thing as /etc/shadow. I was naive enough not to understand hashes, and so I figured that those jumbled letters in the file had to be the actual passwords, and if "*" was in an entry then "*" was, of course, the password! Why didn't it work?!!?
When ‘less’ was created, there was a bug where when you scrolled upwards the passwords would be revealed, so it was decided that the passwords should be replaced with actual asterisks and stored in individual files per-user.
For security, these files were given access rights only for the owning user, and immediately deleted, with an encoded copy of their inode number being stored in /etc/shadow.
Fun fact: forced password changes were initially introduced when disks were getting full and deleted inodes of user password files were due to be overwritten. “For security reasons” was correct but misinterpreted.
That sounds so wrong, anything from a user-written program, `ed`, etc to a symlink/hardlink could read the password.
I believe there is a meme in chat rooms where trolls get unsuspecting users to reveal their passwords by convincing them that the chat replaces it with "***" and so forth. Perhaps the GP is riffing on this.
Man, the internet's no fun anymore.