As of today, passwords of management users are stored on IAP in reversible encryption format. Management password can be seen in plain text in running configuration using show running-configuration no-encrypt. Hence for the same reason WLAN admin wish to have something more secure than an encrypted format.
Starting Instant version 4.3, WLAN admin can enforce hashing of management user's passwords. A hashed password is more secure than an encrypted password the reason being, encrypted password can be decrypted back but hashed password cannot be reversed back to original text.
Hash-mgmt-password is optional for users who upgrade to 4.3. If hash-mgmt-password is not enabled after upgrading to 4.3, management passwords are stored and displayed as it was before. Hash-mgmt-password is enabled by default.
Web UI Configuration:
System -> Admin -> Hashed Management Password
Executing "show mgmt-user" will show if the Hash Management Password is enabled or not.