Don't quite understand how it works? XKCD to the rescue!
http://xkcd.com/1354/
A good overview:
http://www.pcmag.com/article2/0,2817,2456374,00.asp?mailingID=6158474A55FEB96160FDF4ED2964C5D4
Changing your pwds is being recommended, but that won't help if the site that has your pwd...