damn you Eve, always thwarting Alice and Bobs attempts at secure communication.

Eve can "get the connection" by being connected to the same LAN or WLAN as Alice and Bob, with a NIC in promiscious mode. Normally the card will check the MAC address, see someone elses address and drop the frame. However, in promiscious mode, all packets will be accepted and passed to the higher layer protocols.

actually, i read your thing wrong. the above example would allow Eve to pick up what the real Alice and Bob are saying to each other. this is still considered a man-in-the-middle attack. from your example, Eve is actually posing as Alice and Bob to Bob and Alice, respectively. Eve could "get the connection" in a number of ways, messing with DNS, address spoofing, perhaps Eve is working for the local ISP and has been tempted by "the Dark Side" (tm).

Note that in the above example, Eve is able to authenticate as Bob or Alice. how is this possible? (rhetorical) Eve would need to know Alice and Bobs private keys to accomplish this, if a public-key crypto system was used.