Keeping Passwords Embedded In Code Secure?

JPyObjC Dude asks: "When designing any system that requires automated privileged access to databases or services, developers often rely on hard coding (embedding) passwords within the source code. This is obviously a bad practice as the password is then made available to anybody who has access to the source code (eg. software source control). Putting the passwords in configuration files is another practice, but it is still quite insecure as cracking hashed passwords from a text file is a trivial exercise. What do you do to manage your application passwords so that your system can run completely automated and yet make it difficult for hackers to get their hands on this precious information?"

Comments

Wrong Question

[eric.t.f.bat]

First: only an idiot would put a password into source code. That's what configuration files are for. What, you want to have to edit a script every time the password changes? Second, there's no point encoding, encrypting or otherwise "securing" the configuration file. If a user has access to your configuration files, he has access to everything else, and all your security is useless. So really the question is: I don't want the neighbours to see me naked. What should I tattoo on my butt-cheeks to make me safe?