http://blog.moertel.com/articles/2006/12/15/never-store-pass...
Needless to say, almost 5 years have passed and they're still around :) their traffic probably a couple of orders of magnitude higher. I was there when it happened, and yes, probably some Russian hacker or whatnot has my password from there, but that's not such a big deal because reddit doesn't know my name, doesn't have my CC number or any details related to my life.
Now, were this to happen to a company that has a lot more information available about each and every one of us stored in one central place (think Google or FB), then things could get really nasty. And I'm not talking about stupid mistakes like the one from above, I'm talking about MITM attacks orchestrated by (vicious) Governments, or cyber-warfare, or just plain old NSA not having to bother to collect information from a myriad of places anymore, when they can just go directly to the source.
I did not say you couldn't build web applications if you were a jerkass who was cavalier with the security of his users' data. I said you shouldn't.
That would have left us without reddit, I don't know about you, but without it the Internet would have been a lot less interesting.
This sort of behavior is why the rest of us get a bad rap.