I\'ve been reading this article from MSDN on Rfc2898DeriveBytes. Here is the sample encryption code they provide.
string pwd1 = passwordargs[0];
// Create a byte
You typically store the hash of the password, then when user enters password, you compute hash over the entered password and compare it with the hash which was stored - that said, just hashing is usually not enough (from security point of view) and you should use a function such as PKBDF2
(Password-Based Key Derivation Function 2) instead. Here is article covering all that information in more elaborate way as well as sample code (bottom of the page): http://www.codeproject.com/Articles/704865/Salted-Password-Hashing-Doing-it-Right
Here is a link to codereview, which I guess refers to the same implementation as above article.