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Why all these rules? Because a lot of account hacks are based on brute force, dictionary attacks. The attackers pick a target username and just start throwing potential passwords at it. You can guess what happens if you use a word from the dictionary without modifying it. Wait, you say, everyone knows about these substitutions you just told us...yes they do, which is why a phrase is better. After a while most systems will lock out attempts to gain access after a certain number of failed password attempts, so if it isn't an easy password, the attacker will be locked out before they get to substitutions. Yes, it's a numbers game of low hanging fruit. You just have to make a password hard enough for all but the most determined hacker to just give up and move on.
What if your account is hacked? First, you're allowed a few moments of panic, then snap out of it and get going with fixing the problem. For the case of Gmail, Amit Agarwal (who is a well respected and well read geek like me) had his Gmail account hacked and he details how he got it back and how to prevent it from happening .... For other accounts, my advice is to call them on the phone and be ready to have a lot of info on hand to back up your claims that you are you. Obviously if your email, as well as a site has been hacked, using email verification is going to be problematic, so having back up email accounts is key. Let's make that essential.
If you're wondering how good (or bad) your password is, I found a couple online password checkers that you can use to assess your choices. This one from Microsoft is simple and easy for anyone to use.
If you're also wondering if I've ever been tempted to punish friends who don't listen to my password advice (especially if they deal with sensitive or mission critical systems) and change their passwords on them-you bet. And I still might.
Update: As I suspected, it looks as if lax email password security was, again, at the root of Twitter's recent hack. So if you haven't updated your email password yet ... just do it now!
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