A packet sniffer is a utility that has been used since the original release of Ethernet. Packet sniffing allows individuals to capture data as it is transmitted over a network. This technique is used by network professionals to diagnose network issues, and by malicious users to capture unencrypted data, like passwords and usernames. If this information is captured in transit, a user can gain access to a system or network.
How can I protect myself?
If you want to keep information confidential or are concerned about packet sniffing, work on encrypted protocols and encrypt all sensitive data being sent over the Internet or network (e.g. e-mails). For example, e-mails can be encrypted using PGP, anyone still using Telnet should consider using SSH instead, and instead of FTP you can use SFTP.