Recover a Hotmail password using Windows Live Hotmail password recovery
This password "how to" will will help you answer the question "how can I recover my Hotmail password?".
If you forget your Windows Live Hotmail password you may be stuck at this screen:

The good news it that the "Forgot your password?" link can help.
Click on the "Forgot your password?" link and you'll first be asked to prove that you're not a machine:

This prevents robots from trying to recover password and hack into accounts.
Enter the text you see into the "Characters" field, and press "Continue".

Once you've proven your human you'll be take to a choice of how you would like to reset your password, not recover it. Hotmail does not allow you to recover a lost password, but rather once you prove that you are the owner of the account, you'll be able to reset your password.
Your choices may boil down to two: by location and secret question, or by email.
If you choose reset by location, you'll need to provide the following information: your location, and the answer to your secret question.

This is information that you provided when you first set up your account. By entering it here again - particularly by answering the secret question - you're "proving" that you are the same person who set up the account, and therefore are entitled to access it.
If instead you opt to perform the reset by email, you'll be shown which email address that reset link will be sent to:

This can present a problem. If you've not setup an alternate email address, the password reset can only be sent to your Windows Live Hotmail account. If that's the account for which you have forgotten the password, receiving that email can be a problem.
Windows Live Hotmail addresses that with this notification to the right of the above information:

Which leads to the following list of possible ways you may still be able to access your email:
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If you're using a Windows Live ID for your alternate e-mail address and you've selected Remember me on this computer and Remember my password on the sign-in screen, you'll be able to sign in to your e-mail and get your password.
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If you're using a Windows Live ID for your alternate e-mail address and you're using an e-mail program that allows you to save your Windows Live ID and password, such as Outlook, you'll be able to sign in to your e-mail and get your password.
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If you're using a Windows Live ID for your alternate e-mail address and you use Windows Live Messenger, you can sign in to Messenger and click Open your e-mail inbox to access your e-mail.
If you can do neither of those and have no separate alternate email address, then you cannot receive the password reset email, and must use the location and secret question method above.
Once you've either successfully filled in the location and answered the secret question, or once you've clicked on the password reset link in email, you'll then have proven that you are indeed the rightful account owner, and will be presented with the password reset form:

Naturally you should choose a strong password that you will remember.
After having done so, if you do not already have one, Hotmail will ask you to set up an alternate email account:

This is highly recommended, as by now you can see it may be the only way to actually get a password reset should you forget your Hotmail password, and forget your secret answer as well. This should be an account on a different service whose password you will also remember. Make sure to keep this account active.
Finally, you're done:

You can now go back to the Hotmail login screen and login using your newly reset password.
