Replace all letters in a word to * after certain word in text file

If you insist to do it with sed:

echo 'Word: cat' | sed 'h; s/Word: .*/Word: /; x; s/.*Word: //; s/./*/g; H; x; s/\n//'

Result:

Word: ***

Using awk, you don't mention, specific use of sed :)

echo "Word: cat" | awk '{printf $1" "; for (i=1;i<=length($2);i++) printf "*"}'

Result:

Word: ***

You could to this using sed as follows:

echo 'Word: cat' |
sed -e '
   s/Word:/&\n/
   :loop
      s/\n\([^a-zA-Z]*\)[a-zA-Z]/\1*\n/
   tloop
   s/\n\([^a-zA-Z]*\)$/\1/
' 

You could use this time employing the hold space for manipulations, as:

sed -e '
   s/Word:/&\n/   # everything to the right of marker is asterisk zone
   h              # will need later on for reconstructing, so save orig
   s/.*\n//       # retain only the asterisk zone
   s/[a-zA-Z]/*/g # perform the asterisk operation
   H;g            # abut onto original data
   s/\n.*\n//     # peel off unwanted data
'

How about:

$ cat file
Word: cat
Word: foobar
$ sed -E 's/Word: *//; s/./*/g; s/^/Word: /' file
Word: ***
Word: ******

To modify the file in place, just use -i:

$ sed -E -i 's/Word: *//; s/./*/g; s/^/Word: /' file

An awk solution and a shell solution:

echo '"Hello: World"' | awk '{ gsub("[^\"]", "*", $2); print }'

We have to escape the " in [^\"] since the regular expression itself is in double quotes. This generates

"Hello: *****"

With the shell (at least bash and ksh93):

echo '"Hello: World"' | {
  read -r prefix rest
  printf '%s %s\n' "$prefix" "${rest//[^\"]/*}"
}

Assuming the text "Hello: World" is on a line of its own, but embedded in a larger text in the file greetings.txt:

awk '/"Hello: [^"]*"/ { gsub("[^\"]", "*", $2) } { print }' greetings.txt >greet.tmp && mv greet.tmp greeting.txt

or,

while read -r prefix rest; do
    if [[ "$prefix" =~ ^\"Hello: ]]; then
        rest=${rest//[^\"]/*}
    fi
    printf '%s %s\n' "$prefix" "$rest"
done <greetings.txt >greet.tmp
mv greet.tmp greetings.txt

For the input

Specific recipients:
"Hello: Mom!"
"Hello: Cat!"

General recipients:
"Hello: World!"

these two solutions generate

Specific recipients:
"Hello: ****"
"Hello: ****"

General recipients:
"Hello: ******"