PlayStation Network and Qriocity services were compromised in connection with an illegal and unauthorized intrusion into our network. One report indicated that a group tried to sell millions of credit card numbers back to Sony. One other point to clarify is from this weekends press conference. While the passwords that were stored were not encrypted, they were transformed using a cryptographic hash function. There is a difference between these two types of security measures which is why we said the passwords had not been encrypted.”]
Source: https://blog.playstation.com/2011/05/02/playstation-network-security-update/