Cleartext refers to text data that is not encrypted.
Any time an application stores a password as cleartext, its value is potentially exposed in a variety of ways. Obviously this exposure must be limited. While a program will receive the password from the user as cleartext, this should be the last time it is in this form. Hash functions allow programs to indirectly compare an input password to the original, without storing a cleartext or decryptable version of the password. This approach will therefore minimize the exposure of the password without presenting any practical disadvantages.