Drupal is capable of sending out a few different emails to users depending on different actions. The emails can be customised quite nicely with usernames, passwords, email addresses and other things by using a set of tokens. The password recovery email states that you can use the "!password" token to send the user their new password, but after a few tests I found that this token doesn't get replaced when the email is sent out.
The simplest solution here is just to remove this token from the description for this email. However, if you do want to allow user's to reset (and receive) their passwords by using this form then there are a couple of simple things you can do.
The first thing to be done is alter the user_pass form so that it uses a custom submit function that we will write. Add the following form hook to a module (or create your own for this purpose).