If I correctly understand what ranko84 is on about, this would be a simpler function with roughly the same result.

<?php
function obscure($password, $algorythm = "sha1")
{
        // Get some random salt, or verify a salt.
        // Added by (grosbedo AT gmail DOT com)
        if ($salt == NULL)
        {
            $salt = hash($algorythm, uniqid(rand(), true));
        }

    // Determine the length of the hash.
    $hash_length = strlen($salt);

    // Determine the length of the password.
    $password_length = strlen($password);

    // Determine the maximum length of password. This is only needed if
    // the user enters a very long password. In any case, the salt will
    // be a maximum of half the end result. The longer the hash, the
    // longer the password/salt can be. 
    $password_max_length = $hash_length / 2;

    // Shorten the salt based on the length of the password.
    if ($password_length >= $password_max_length)
    {
        $salt = substr($salt, 0, $password_max_length);
    }
    else
    {
        $salt = substr($salt, 0, $password_length);
    }

    // Determine the length of the salt.
    $salt_length = strlen($salt);

    // Determine the salted hashed password.
    $salted_password = hash($algorythm, $salt . $password);

    // If we add the salt to the hashed password, we would get a hash that
    // is longer than a normally hashed password. We don't want that; it
    // would give away hints to an attacker. Because the password and the
    // length of the password are known, we can just throw away the first
    // couple of characters of the salted password. That way the salt and
    // the salted password together are the same length as a normally
    // hashed password without salt.
    $used_chars = ($hash_length - $salt_length) * -1;
    $final_result = $salt . substr($salted_password, $used_chars);

    return $final_result;
}
?>