The authenticators now have an encode function that cloudstack will use to encode the user supplied password before storing it in the database. This makes it easier to add other authenticators with other hashing algorithms. The requires a two step approach to creating the admin account at first start as the authenticators are only present in the management-server component locator.
The SHA256 salted authenticator make use of this new system and adds a hashing algorithm based on SHA256 with a salt. This type of hash is far less susceptible to rainbow table attacks.
To make use of these new features the users password will be sent over the wire just as he typed it and it will be transformed into a hash on the server and compared with the stored password. This means that the hash will not go over the wire anymore.
The default authenticator in components.xml is still set to md5 for backwards compatibility. For new installations the sha256 could be enabled.
