You just change what the user sees... it's not really encryption. This puts the user input in Pass$ then makes Out$ a string of the same size as Pass$ with *'s instead. It prints both to show you it works.
sync rate 0
sync on
do
a$=entry$()
clear entry buffer
if a$<>""
Pass$=Pass$+a$
if asc(a$)=8 then Pass$=left$(Pass$,len(Pass$)-2)
if asc(a$)=13 then Pass$=left$(Pass$,len(Pass$)-1):exit
endif
Out$=""
for t=1 to len(Pass$)
Out$=Out$+"*"
next t
cls
text 0,0,"Output to Screen = "+Out$
text 0,20," Actual Text = "+Pass$
sync
loop