how are passwords being bypassed?

I am running a network of Win98SE computers. Some folders
on a PC are shared over the network and I checked "Depends
on Password" when setting up the share properties. When a
user on another computer gets the dialog box to enter the
password, he or she can enter a bad password and get
denied, but can also just hit enter and gain full access.
How can I stop this from happening? Thanks.