Richard Lord has posted a new entry today talking about working with passwords and keeping them secure:
If you build websites that require users to register it's your responsibility to keep their passwords safe. And if you're storing the passwords in plain text then you're not doing your job properly. [...] There's always a chance your database could be stolen. So, the simple rule is to hash your passwords.
His post talks about hashing with simple examples and a mention of an additional method of protection against the database of hashed passwords being stolen - salting the stored values.