In practice hashing is often much less secure than encryption for passwords. The devil is in the details.
Here it seems that Adobe made some poor design choices in the encryption algorithm. Yet, despite these flaws, assuming the encryption key is not compromised they might still be better off with their encryption rather than a poor hash mechanism such as the one used for example by Sony and revealed in the playstation hack by anonymous.
In general if the encryption key is not compromised, then encryption provides much more security than pure hashing, or even hashing with a salt. The reason for that is that with encryption, the security of the password depends on the strength of the secret key. With hashing, the security depends of the strength of the password. This is a significant difference. So, if your password is 4 characters long, even the best hash algorithm will fail to protect from a brute force attack. However, if that same password is encrypted, you need to brute force the key which would take centuries assuming the key is long enough.
To be more precise:
1) Pure hashing (applying SHA1 alone for example) is almost the same as having no security at all.
2) Hashing with a salt is a bit better but still won't resist long given computational power offered by GPUs and cloud computing.
3) An iterated hash function with a salt is much better (see PKDF2), and buys you some security but still vulnerable from brute force attacks using GPUs and pooled cloud resources.
4) A "sequential memory-hard" hash function (with salt and iteration) such as "scrypt" is pretty safe today.
Unfortunately in reality most companies use either (1) or (2)...
The drawback of encryption is that you need to make sure that your key is safe. Once the key is compromised you're toast. This means that you should not put the key on the same system that is hosting the password database (it may sound evident, but I've seen it done). It requires putting the key in a HSM (Hardware Security Module) or in a distinct ultra secure server, distinct from the password database.
Of course, if you have the possibility to keep a key secure, the best option is to use a *keyed* hash function (an iterated salted version of HMAC for example), getting the benefits of both worlds...