http://dev.mysql.com/doc/refman/5.1/en/default-privileges.html

To use SET PASSWORD on Unix, do this:

anonymous account passwd or removal
shell> mysql -u root
mysql> SET PASSWORD FOR ''@'localhost' = PASSWORD('newpwd');
mysql> SET PASSWORD FOR ''@'host_name' = PASSWORD('newpwd');

shell> mysql -u root
mysql> DROP USER ''@'localhost';

shell> mysql -u root
mysql> SET PASSWORD FOR 'root'@'localhost' = PASSWORD('newpwd');
mysql> SET PASSWORD FOR 'root'@'host_name' = PASSWORD('newpwd');

Resetting permission

http://dev.mysql.com/doc/refman/5.1/en/resetting-permissions.html