Sharepoint:The password supplied with the username Domain\username was not correct. Verify that it was entered correctly and try again

This error occurs if there has been change of password of the account and same has not been updated in SharePoint.

To solve:

1- Log in as Administrator

2- Open Command prompt

3- Write the following

cd C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\14\BIN

stsadm -o updatefarmcredentials -userlogin Domain\UserName -password newpassword

4- if get the following message "Operation completed successfully" Now reset IIS, then the problem solved and you will be able to create web application.

http://cloudytech.blogspot.com/2013/05/the-password-supplied-with-username.html