CE 1.8 inherits from EE 1.13 and lists as a change:
“The cryptographic methods used to store passwords were improved to enhance security”
As far as I know, earlier versions used APR1 which is a 1000 iteration loop of MD5 with a 32-bit salt, then encodes the 128-bit result in 6-bit chunks to a text readable format using a fixed 64 entry array of printable characters.
How has this changed in the new versions? There does not seem to be any documentation with any details.