When you are using the Raspberry Pi Keyboard and for some reason, the password you are typing is "incorrect" but you are 100% sure it is correct it is important that you take note of the lock key lights in the top right corner.
The Raspberry Pi keyboard has three lock keys: Num Lock, Scroll Lock, and Caps Lock.
There are three LEDs in the top right-hand corner that indicates which locks are enabled, if the light is on it is enabled.
Num Lock – Allows use of the red number keys on the letter keys, effectively creating a numeric keypad. This mode is enabled and disabled by pressing the Num Lock key, if the red light is on it means it is enabled and you will not be able to use the letter keys where there are red numbers.
For example: If your password is "milk" and the num lock is enabled and you type the password it will type "0532" instead of "milk" so always ensure that the red light is off (Num Lock Disabled) if you need to use the letter keys.
Caps Lock – Allows typing capital letters; press the Shift key to type lower-case letters in this mode. This mode is enabled and disabled by pressing the Caps Lock key.
Scroll Lock (ScrLk) – Allows the use of the cursor keys for browsing web pages and spreadsheets without the mouse. This mode is enabled and disabled by pressing the ScrLk key while holding the Fn key.