By converting the user’s password to MD5 and storing it on the server’s database, the hacker wouldn’t be able to instantly know your password, even if he managed to access the database. To solve this problem, a type of cryptographic hash function called MD5 had been introduced which was deemed safer at that time because it is a one way process. Other than that, less security minded people will probably use the same password for all online services and this will potentially allow the hacker to gain access to all other services belonging to the user. This is obviously unsafe because a hacker that manages to hack into the server will instantly have access to thousands of passwords. Many years ago, passwords stored in database were clear text which is why it is possible to recover lost passwords. It is common to find websites that allow registration and the login information consisting of username and password is normally stored in the server’s database.
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