404 Not Shown For Custom Module - Drupal 7
It's the expected behavior, and it's described in the documentation for hook_menu(), even it  could not be clear, at a quick read.


  Callback Functions
  
  The definition for each path may include a page callback function,
  which is invoked when the registered path is requested. If there is no
  other registered path that fits the requested path better, any further
  path components are passed to the callback function. For example, your
  module could register path 'abc/def':

function mymodule_menu() {
  $items['abc/def'] = array(
    'page callback' =&gt; 'mymodule_abc_view',
  );
  return $items;
}

function mymodule_abc_view($ghi = 0, $jkl = '') {
  // ...
}

  
  When path 'abc/def' is requested, no further path components are in
  the request, and no additional arguments are passed to the callback
  function (so $ghi and $jkl would take the default values as
  defined in the function signature). When 'abc/def/123/foo' is
  requested, $ghi will be '123' and $jkl will be 'foo'. Note that
  this automatic passing of optional path arguments applies only to page
  and theme callback functions.


This means that, for example with login/asdfdsa, Drupal will first check if there are modules that handle that path. If there aren't modules handling that path, Drupal will check if there are modules handling every path matching login/*; if there aren't modules for those paths, Drupal will check if there are modules that handle login. In your case, that is your module. (I left out how Drupal handles the path aliases, as in this case isn't relevant.)

That happens also for other paths, for example node/1. If you have a node whose ID is 1, /node/1 shows it. If you try to access a path like, for example, /node/1/sdfgrgjpqwd432az, you will still see that node. (sdfgrgjpqwd432az is just a random string, to be sure I am not using a path for which a module defines a page callback.)