This is a cached copy from cydia.saurik.com/password.html
0: Install MobileTerminal Package
1: Run MobileTerminal
This program will be on your SpringBoard are called "Terminal".
2: Obtain Administrator Access
Run "su root" and provide the root password. The default password as provided by Apple is "alpine".
Here I also run "cd" only to shorten the otherwise very long prompt.
3: Change the root Password
Run "passwd" and type in your new password twice. Please note that your keypresses will not be displayed on the terminal screen (for security).
4: Change the mobile Password
This is the regular user account on the device. Run "passwd mobile" and repeat as directed above.
5: Close MobileTerminal
Congratulations! Your job is done!