I just read an article about the recent wordpress vulnerability (if you're running wordpress, please update to 2.5.1 NOW), one point raised my attention: The attack uses MD5-collisions.

I wrote some articles about hash collisions a while back. Short introduction: A cryptographic hash-function is a function where you can put in any data and you'll get a unique, fixed-size value. »unique« in this case scenario means that it's very hard to calculate two different strings matching to the same hash value. If you can do that, the function should be considered broken.

The MD5 function got broken some years back (2004) and it's more or less a question of time when the same will happen to SHA1. There have been scientific results claiming that an attacker with enough money could easily create a supercomputer able to create collisions on SHA1. The evil thing is: Due to the design of both functions, if you have one collision, you can create many more easily.

Although those facts are well known, SHA1 is still widely used (just have a look at your SSL connections or at the way the PGP web of trust works) and MD5 isn't dead either. The fact that a well-known piece of software got issues depending on hash collisions should raise attention. Pretty much all security considerations on cryptographic protocols rely on the collision resistance of hash functions.

The NIST plans to define new hash functions until 2012, until then it's probably a safe choice to stick with SHA256 or SHA512.