JerseyGirl
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It sounds like your experience is more recent than mine, but when I traveled abroad, all sorts of people took my passport--customs officers on moving trains, innkeepers (overnight), rental agents, etc. Frankly, I was pretty shocked. (I'm talking about Western Europe and the Balkans.)
Giving Passports to Others
Make copies before you go. In some countries hotels are required to keep photocopies of your passport, if you don't want to trust hotel staff with your passport, e.g. if staff have to leave the hotel premises to make a copy, you will be able to provide your own - no need to be overly paranoid, but having staff run across town with a passport worth more than they make in a year, to find the only Xerox in town, might prove too tempting for some people. In any case you should never hand over your passport as a security or guarantee under any circumstances, except as required by law or as a condition of release on bail. Ask for the copy back when done with that vendor.
http://wikitravel.org/en/Passport