By default, SkyVault Process Services uses the org.springframework.security.crypto.password.StandardPasswordEncoder for encoding passwords in the database. Note that this is only relevant when using database-backed authentication (so does not hold LDAP/Active Directory). This is an encoder that uses SHA-256 with 1024 iterations and a random salt.
You can override the default setting by implementing the com.activiti.api.security.AlfrescoPasswordEncoderOverride interface.