I think you are missing some things in your .htaccess. Here's how it's supposed to look like:
in reply to .htaccess file
AuthName "this is neat"
<Limit GET POST>
Note the AuthUserFile points to a .htpasswd, not .htaccess, and that the path is a file path, not a URL.
To create your .htpasswd file, use the command `htpasswd -c .htpasswd username_here` from the shell. The -c flag is only needed for the first user.