[Latest revisision to include IE support]

^{Update for IE9: Version 9 of IE allows the change of the type attribute for input elements of type text/password back and forth}

As mentioned in the comments (and verified) the previous examples did not work in IE as it does not allow the change of the type by script ... Here is a workaround, which replaces the element with another back-and-forth (code assumes you start with a text box)

var element = document.getElementById('mysearch');



var text_to_show = 'Enter Password';



element.value = text_to_show; // set the message for the first time



element.onfocus = function(){ 

                       if (this.value == text_to_show) 

                           {

                             var newElement = convertType(this);

                            newElement.value = '';

                            setTimeout(function(){document.getElementById(newElement.id).focus()},100);

                           }

                       }

element.onblur = function(){ 

                       if (this.value == '') 

                          {

                            var newElement = convertType(this);

                            newElement.value = text_to_show;

                          }

                    }





function convertType(elem)

{

    var input = document.createElement('input');

    input.id = elem.id;

    input.value = elem.value;

    input.onfocus = elem.onfocus;

    input.onblur = elem.onblur;

    input.className = elem.className;

    if (elem.type == 'text' )

      { input.type = 'password'; }

    else

      { input.type = 'text'; }



    elem.parentNode.replaceChild(input, elem);         

  return input;

}

[update]

scrap the original answer, i missed the part that you want to keep the field as password (with hidden contents)

Revised answer:

var element = document.getElementById('mysearch');



var text_to_show = 'Enter Password';

element.type=text; // set the type to text for the first time

element.value = text_to_show; // set the message for the first time

element.onfocus = function(){ 

                       if (this.value == text_to_show) 

                           {

                            this.type=password;

                            this.value = '';

                           }

                       }

element.onblur = function(){ 

                       if (this.value == '') 

                          {

                            this.type=text;

                            this.value = text_to_show;

                          }

                       }

[original answer]

var element = document.getElementById('inputID'); 

//  inputID should be the ID given to the password element



var text_to_show = 'Enter Password'

element.value = text_to_show;

element.onfocus = function(){ if (this.value == text_to_show) this.value = '';}

element.onblur = function(){ if (this.value == '') this.value = text_to_show;}