How does debian/linux detect a wrapped version of an old password?

[bacalao]

When I was changing my password with the "passwd" command in Debian Lenny,
after the confirmation, I received the following message:

Bad: new password is just a wrapped version of the old one

I know the passwords are not saved in clear text, but hashes. Even further, when a single char changes in the string (the password in this case) the hash is completely different.
So,
how does linux detect a wrapped version of an old password?

Thanks in advance.

[tornow]

Check this (for example):
passwdqc

[sgosnell]

The system knows both the old and new passwords. They're not hashed at that point. It's trivial to see minor variations of the two. It should let you use the new password, it's just warning you that it's a security compromise, and anyone who has the old password can easily find the new one.