So Adobe has a password breach back in October. Being security super-geniuses, the wise people at Adobe decided to encrypt their passwords instead of hashing them.
Why is this stupid? Put simply, a good hash is a one-way function: you can go from password to hash but never the other way around. Encryption is a two-way function: one party encrypts the data, and a later party decrypts the data. Encryption implies decryption, and if you find the algorithm used to encrypt the data originally, you can retrieve all of the plaintext passwords quite easily. With a good hashing algorithm, however, you have to build and populate a rainbow table. If you do a really good job—using per-user salts—you essentially require the attacker to build a rainbow table for each user account, something that your average attacker simply won’t do.