http://msdn.microsoft.com/en-us/library/xdt4thhy.aspx
That shows you step-by-step how to implement forms
authentication.
Still not sure about the one-time password. You can have a
one-time password which means you generate it once and it's only
valid for a small period of time. E.g. it expires after 30 seconds.
This is similar to the dongle from your bank which gives you a
semi-random number. You could generate this from a seed value as
shown in this example
http://msdn.microsoft.com/en-us/magazine/cc507635.aspx
However the process is quite complex. None-the-less that is a
step by step guide.
Double check that you're not being asked to implement one-way
encryption for the password which is much more common compared to
one-time passwords.