This error message will be generated when the email server does not recognise the format of the password. This occurs when any type of encryption or secure password protocol is used.
This is because the mail server is expecting a plain text version of the password. If it gets an encrypted version it will reject it because it does not match the plain text version it has.
To avoid this problem you need to check your email software to ensure that it is not using any kind of secure connection method or secure password authentication method.