OMNIBus users are divided into two groups, external and internal authenticated. internal authenticated user have their user name and password stored in security.users table. passwords are encrypted for obvious reason.
those passwords can be encrypted using different algorithm. you have choice between DES and AES mode. DES is the default.
Which encryption algorithm to use is totally up to security compliment requirement. for example I use plan taxt password in all my Netcool vmware images. However, in a production environment, one should always use AES(or AES_FIPS) instead of DES, this is because that WEBTOP (WEBGUI) doesn't support DES encryption algorithm. if you ever want to encrypt the password stored in Webtop datasource definition file, then you have to run objectserver with PasswordEncryption property set to "AES".
Things might change with new releases, above is only true to current version. OMNIBus 7.3.0 and WEBGui 7.3
Which encryption algorithm should I use for objectserver