Q. The current procedure invoked by passwd, or when I'm forced to 
change my password, is very confusing, can you explain what happens?

A. In fact, the procedure has been much improved.  It's still
true that password changes have to be performed by a special node
called the "password server" - however, this is mostly hidden 
from you now.

The dialogue is as follows:
  
  fred@llf401: passwd
  Please enter old (i.e. current) password: [TYPE OLD PASSWORD]
  Please enter new password: [TYPE NEW PASSWORD]   
  Please re-enter new password: [TYPE NEW PASSWORD]
  Connecting to the password server.
  Password change successful.
  Changes will take up to  5 minutes to propagate to the rest of
  the HPCx system.
  /usr/bin/passwd complete.

After this you will be logged out.  Don't forget the 5 minutes
delay!  You shouldn't try to log in until this period is past.

Changing your shell, using "chsh", is similar, since it also uses
the password server.