Make that > 50 years 
In those times characters you typed on the TTY where send over the data communication line to the computer which then echoed back the code which made the TTY throw that character on the paper. For secret things like passwords, the echoing was switched off. It has ever been like that. It is thus NOT a feature of the terminal (and that is why it works on all terminal (emulator)s). It is in the terminal driver of the kernel.
And of course, what you type arrives at the terminal driver and thus will be forwarded to the password checker. And it will be rejected when wrong.