I don't personally suggest the method you are inquiring about.... most password systems as of late, have been using an MD5 (or some other algorithm) to "Hash" the password. Just a little defination here, a Hash is a string that can NOT be decrypted. It's gone through some crazy algorithms that make the string permanently encrypted. Under normal circumstances, this doesn't seem like a very good plan huh? What we do next, though, is when we want to see if the password is correct, is we use the exact same algorithm to Hash what the user types in for the password, and compare the two Hashes with each other. Naturally, if both Hashes are identical, then the password must clearly be the same too. This increases the workload of a password cracker significantly, and adds countless more attempts to a bruteforce attack.
There are pretty good encryption algorithms out there that are pretty darn secure, and at the same time, are decryptable (such as blowfish and triple des) and most of these require a key pair, that gets generated, and only the partner key of something encrypted can decrypt it.
If you aren't THAT worried about security, and only want to keep prying eyes from seeing the password in plain text, then you could do something as simple as an XOR encryption, which is nothing more than an exclusive OR of bits.