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There are essentially two files 1> /etc/passwd - This is where the user information is stored. 2> /etc/shadow - This is where the user password hash is stored.
The newer Linux kernels also provide something known as PAM authentication. It is a module written to allow services and applications authenticate users. More on PAM at http://en.wikipedia.org/wiki/Lin...
If you are wanting to use authentication for an application / service that you are developing, I'd suggest using PAM.
If the question is only for information, then you may want to look at http://www.faqs.org/docs/Linux-H...