If you want to learn how to store passwords securely, you could do a lot worse than looking at the OWASP Password Storage Cheat Sheet. These cheat sheets are generally pretty good, and the password storage one is particularly good. The editors do a great job of keeping it up to date and incorporating the latest research from experts. (Just bear in mind that the recommendations there are when using password for authentication. If you’re using a password to encrypt sensitive data then you should be aware of some limitations).
One of the hash functions that OWASP recommend is bcrypt, which should be familiar to anyone who’s ever looked at password hashing. Bcrypt is generally an ok choice, but it has some quirks that make it hard to love. As pointed out in the cheat sheet, many implementations cannot handle input passwords longer than 72 bytes. (And some implementations are not binary safe either). To get around this, it was common advice at one point to “pre-hash” the input using some other fast hash function like SHA-256. That is, rather than the stored password hash being bcrypt(password) it was bcrypt(sha256(password)) or something similar. This was also sometimes done when an old insecure password database using something like unsalted MD5 was upgraded by simply re-hashing the existing hashes with bcrypt: md5(password) -> bcrypt(md5(password)).
On the face of it, this seems like a reasonable and safe thing to do. After all, if someone gets a copy of your password database they will be faced with a list of hard-to-crack bcrypt hashes, rather than raw unsalted MD5 or SHA-1 or whatever.
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Neil Madden 