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Because it is a courteous thing to do, indeed.
In other word, they are saying that you do the same thing when they
enter their passwords. Unix by nature is a network-based, and a
multi-user operating system. It is each user's sole responsibility to
manage one's own password that nobody can crack (supposedly), and
furthermore to ensure the security of the system in a collective sense.
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However, it is possible for someone to peek on your password key strokes
over your shoulder, either unintentionally or intentionally. In such
case, you should tell someone, "say, no pun intended, but I do not feel
comfortable you watching over my password key stokes. Please give me a
moment to finish my login alone." This is nothing wrong or an impolite
thing to say.
Please let other people know about this important security
element in case that they do not know it yet.
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