I'm no security expert, but typically websites will take the user inputted password and perform an encryption like an MD5 encryption on them, then store them in a database. Example: 'password' when encrypted with an MD5 algorithm becomes '5f4dcc3b5aa765d61d8327deb882cf99'. It would be impossible to take '5f4dcc3b5aa765d61d8327deb882cf99' and determine that it is 'password'. When someone logs in and types 'password' to their account, it is encrypted again and compared to the stored encryption. (In addition a good system will 'salt' the value to further complicate things so you can't just see that md5 checksum and go look up possible combinations).
When I saw the hack attempt the most alarming thing was that in Bethesda's response they have claimed that the hackers have access to the passwords, which indicates that they aren't using this kind of protection.
Is there a reason they are using the PSN strategy of network security?