I believe there are some nice precompiled encryption functions for c++. I once read somewhere that you should not try to make your own encryption functions unless you are a security expert which we aren't ;p
but if you really want to make it yourself you should assign a value for each character (or use ASCII) and do some operations on it. like bitwise OR ( | ) then you have a new number and convert it again to characters. and there is your encrypted data.
for example if your password is 'klmno'
k=107 ----- l=108 ------- m=109 ------- n=110 ------- o=111
1101011--- 1101100 ---- 1101101 ------ 1101110 ---- 1101111
use | on 2 characters next to each other and also on 'k' and 'o'
below i converted the answer already to ASCII again
k | l --> o
l | m --> m
m | n --> o
n | o --> o
o | k --> o
so the encrypted password becomes 'omooo' (this looks not really good but that is because the binary values of k,l,m,n and o are next to each others)
but this reveils a new problem which is called collission. if you type in 'olmoo' it also gets encrypted to 'omooo'. that is called collission. and the hacker can use collissions to break in. to prevent this from happening you should have more complicated operations on the ASCII values and you should use a fixed length of the encrypted data(for example always 128 bytes (128 characters)).
i hope this give you an idea of basic encryption.