As stated above, md5() makes sure that if your database is compromised, they still don't have access to the actual passwords.
Further, md5() can serve to make sure you don't get dangerous sysadmins... if you were a sysadmin, and you had access to 500,000 plain-text passwords, how big a temptation ( and how easy to get at ) would those 500,000 plain-text passwords be for you?
Further, what if you work on a team of people, all of which program your PHP application. Do you trust EVERYONE you work with to not use those passwords ever? Think all of them will avoid the temptation to login to someone's account? Steal someone's account?