How Does a Password Hack Work?

A fairly well-detailed article at Ars Technica on the "Anatomy of a Hack" shows how hackers go about the process of cracking supposedly secure passwords.
In March, readers followed along as Nate Anderson, Ars deputy editor and a self-admitted newbie to password cracking, downloaded a list of more than 16,000 cryptographically hashed passcodes. Within a few hours, he deciphered almost half of them. The moral of the story: if a reporter with zero training in the ancient art of password cracking can achieve such results, imagine what more seasoned attackers can do.

Imagine no more. We asked three cracking experts to attack the same list Anderson targeted and recount the results . . . Even the least successful cracker of our trio—who used the least amount of hardware, devoted only one hour, used a tiny word list, and conducted an interview throughout the process—was able to decipher 62 percent of the passwords. Our top cracker snagged 90 percent of them.  
The strength and speed of this attack is not surprising however, since the passwords were encrypted with the MD5 algorithm, which is widely considered to be cryptographically broken.  The first flaws were found in the algorithm in the 1990's, and many more followed over the course of the last ten years.  So the question is: are a lot of websites still using broken encryption schemes?  And if so, how many? And which ones?

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