The easiest way to describe a Cryptographic Fingerprint (aka Hash) is that it generates a very large unique number for any given input. That is, if I have a 2GB file and I change 1 character in the file, the hashes will be very different.
Hashes are one-way; this means that if someone sees the hash of your password it is extremely difficult to determine the password from the hash; only a brute-force method will suffice.
This makes the SHA 256 Hash a good choice which to determine if your password is correct or not after it is first entered. We run the hash on your password once, store it, and subsequently compare the hash of your password with the original hash we stored.
It is currently industry best practice to store passwords using the SHA 256 Algorithm.