During conversion, FileMaker creates an account for each password. Because it has no way of knowing what that account name should be, the account name is (initally, at least) set to be equal to the password. So, if you use "abcdef" as the password, the account name will also be "abcdef".
Hint: When opening the file, you can leave the account name blank and just enter the password to avoid exposing the password in plain text.
I've attached a file that explains the conversion process.
IN addition to Mike's clear and correct info, I suggest that you go into the File>Manage>Security settings and clean up the old converted accounts so they have real account names and passwords ASAP.
If you ever want to do any user tracking, such as recording Last Modified By (account name), you won't want the working password exposed by leaving the account names and passwords the same.
The new security model of the .FP7 and .FMP12 files is a huge leap forward from the older file security, and well worth exploring in detail.
Thanks to you both.