"When you login to LastPass, two things are generated from your Master Password using our code discussed previously before anything is sent to the server: the password hash and the decryption key. This is all done locally.
The password hash is sent to our servers to verify you. Once verified, we send back your encrypted Vault. We are only sent your hash, not your Master Password. The decryption key, which NEVER leaves your computer, is then used to decrypt your Vault once it comes back."