about the passwd in the database

hello,everyone, I am trying to write a NAS software which is located in the user PC.But now,I meet problems: I have read some codes of freeradius-0.9.3,and find that on the SERVER the user-passwd is make out of the MD5 digest.I also find that the server use the real user-passwd from the database to compare with the user-passwd from the RADISU packet. Any one can help me to resolve the problem? Why the user-passwd is turned into real passwd which is used to compare with the passwd from the database? Thank you for all reading my poor English. regards