function createRandomPassword() {
    $chars = “abcdefghijkmnopqrstuvwxyz023456789″;
    srand((double)microtime()*1000000);
    $i = 0;
    $pass = “” ;
    while ($i <= 7) {
    $num = rand() % 33;
    $tmp = substr($chars, $num, 1);
    $pass = $pass . $tmp;
    $i++;
}
    return $pass;
}
$newpassword = createRandomPassword();

Taken from here.