On Reddit.com there's a good conversation going on in the PHP category about login security and best practices surrounding it.

So I was handed an ancient project which was up to me to fix / improve. About a week later I am about done but there is 1 thing I left...Login security. As it is now, it's just md5(password) that's saved in the database. Better then nothing, but far from good enough. My plan was to have a constant pepper in the class which handles the logins, then do something like crypt(pepper . $password) to store it, since that should generate a random salt and is slower then sha1 / md5 / etc. I feel this should be save enough, do any of you have any ideas on how to improve it (without non-standard extensions)?

There's lots of comments so far and a lot of them are following along the same lines - use a better method of encryption, something like crypt with Blowfish or something similar as well as some hashing (like HMAC).