I also had the problem using md5, it converts the password into random digits and alfanumeric characters. You need to compare the entered password md5 encrypted with the md5 encrypted in the database. For example:
$enteredpassword = "mypass";
$enteredusername = "me";
$query1 = "SELECT * FROM auth WHERE username='$enteredusername'";
$result1 = mysql_query($query1);
$row = mysql_fetch_array($result1);
if (md5($enteredpassword) == $row[password]) {
echo "Login is succesfull";
} else {
echo "Login didnt work";
}note that the password needs to md5-encrypted in the database.