Passwords stored using reversible encryption: how it works (part 1)

In case you missed my HAR2009 talk: in the second part I talked about a Windows feature called ‘Store passwords using reversible encryption’. When this is enabled (per user or for the entire domain), Windows stores the password encrypted, but in such a way that it can reverse the encryption and recover the plaintext password. This feature exists because some authentication protocols require the plaintext password to function correctly, the two most common examples are HTTP Digest Authentication and CHAP.

This feature is not enabled by default but I’ve seen it a couple of times in customer networks. As I couldn’t find any description of how this mechanism works or any tool to recov…