A password hash is a transformation of a password using what we call a “one-way” function. So, for example, ROT-13 (rotate by half the alphabet) would be a very, very bad password hash function and would give fairly recognizable results like “Cnffjbeq123!”. The one-way property means it must be essentially impossible to construct the inverse function and recover the original, and functions like MD5 or SHA1 certainly meet that particular criterion. Iterated encryption functions like DES have also been used (for example LAN Manager hashes), but seem to have fallen out of favor a while ago. There are a load of technical, cryptographic details which neither you or I need to know, but essentially we’ll end up guessing at loads of passwords and then performing the same one-way function and checking to see if we’ve arrived at the correct answer.