Although in theory RPC API access should be locked down, there are occasions where cleartext passwords have been used anyway.
HTTP Basic authentication remains, but a new default "Bitcoin" HTTP Authorization header is used. HTTP Digest authentication was considered initially, but that may require additional HTTP round-trips. The standard HMAC-SHA256 algorithm pair was chosen instead, with some additional stirring factors (random nonce, time).
The HTTP server will accept Basic or Bitcoin authentication now.
The HTTP client will attempt Bitcoin authentication, and fall back to Basic if that fails.