I have a closed beta service and we just released a prototype to get user feedback.On our site we allow users to use their gmail/hotmail/yahoo accounts to authenticate themselves. As far as implementation is concerned we take all the precaution to make this login safe. We use SSL, do not record any passwords or users etc.. in short we are legit. However, users still seem to be hesitant to provide their password and username to a small service like ours. Market penetration of OpenID and tools like ClickPass is so limited that those words on our site don't do any good either.
How can I make users trust my site?
+ http://developer.yahoo.com/addressbook/
+ http://msdn.microsoft.com/en-us/library/bb463989.aspx
Stop using the password anti-pattern (http://adactio.com/journal/1357)
Facebook has a nice auth flow that http://www.billmonk.com uses. I'd suggest that.
Oh, and hire a visual designer. A strong visual design goes a lot farther than any copy or lock icons ever will.