As I was setting up a new Drupal site, I decided to try out the hilariously named phpass module. (I cannot read that as “PH Pass” to save my life. It always comes out as… something else.)
The good news about this module is that it builds upon a PHP project called, um, phpass to add better password hashing to Drupal. The traditional way to handle passwords is to ask the user for one, compute a hash function on it, and store the hashed version. Unix systems use the Unix crypt utility to make the hash.