Hashing passwords before storing them in a database is crucial for security, as it protects sensitive information from being exposed in the event of a data breach. Unlike encryption, which can be decrypted, hashing transforms data into a format that cannot be reversed, thereby enhancing security. The bcryptjs library for Node.js is a popular tool for implementing password hashing, as it allows the generation of a hash using a password and a salt, making it unreadable to unauthorized parties. Additionally, bcrypt provides functions to compare plain text passwords with hashed ones, enabling secure user login verification without revealing the original password. An example involving bcryptjs, Couchbase, and uuid demonstrates how to create a secure system for storing and validating hashed passwords, emphasizing that plain text passwords should never be stored in databases, regardless of their security level.