On PHPMaster.com they've posted a new tutorial by Sean Hudgston that helps you understand HTTP digest authentication, a simple way to authenticate a user or script against your application.
Digest Access Authentication is one method that a client and server can use to exchange credentials over HTTP. This method uses a combination of the password and other bits of information to create an MD5 hash which is then sent to the server to authenticate. Sending a hash avoids the problems with sending a password in clear text, a shortfall of Basic Access Authentication.
He starts out by looking at the "basic authentication" mechanism that's built into most web servers and points out that it has a major flaw - sending the username/password in (pretty much) plain text. Digest, on the other hand, uses a MD5 hash created from a few pieces of information including username, realm and request method. The result is sent as a header back to the server that can then be parsed by PHP. He also talks about improving on the basic version of the digest method using the qop, nc, and cnonce optional parameters.