These are list of files, related to user information, and dealing with encrypted password.
Files: group, passwd and shadow
These are the files that contains information about users.
This contains a list of groups and their users.
$ cat /etc/passwd
This contains a list of users and their home path and shell path
all users can read this
# cat /etc/shadow
This contains a list of users with their encrypted password.
Just the root user can read this
man 3 crypt
id => method of encryption 1 => MD5 2a => Blowfish 5 => SHA-256 6 => SHA-512
salt is a two-character string chosen from the set [a–zA–Z0–9./]
Based on the id and the salt the encrypted password will generate
sha(salt + password)