I recently found this article about password storage on Web browsers. It’s more than a year old which means some approaches may have changed, but it still is interesting reading.
Personally, I use (and always recommend) a password manager such as KeePass or LastPass, because it gets easy to always have the passwords at hand and it helps a lot on not reusing passwords from site to site. It’s funny that by the time of the mentioned article only Firefox had an approach similar to these password managers, and the master password wasn’t even required. I guess it comes down to being user friendly and make things easy for less informed users, but probably those users are the ones that more likely have some malicious stuff running on their system. Oh well..