The MD5 hashing algorithm is used by NTLM2 authentication. MD5 stands for Message-Digest algorithm 5. It uses a 128-bit key and is a widely used hashing algorithm. LM hash is used with passwords of 14 or fewer characters.
If you use a password of 15 characters or more on newer versions of Windows, the OS will store a constant string as the LM hash, which is effectively a null password, and thereby uncrackable. The real password will be stored as an NTLM2 hash and (in this case calculated with MD5) will be used solely.