Postgres files postgresql.conf and pg_hba.conf - which take priority?

There is no priority to choose because they have different purposes.

• password_encryption in postgresql.conf tells how to hash a new password when it's changed or a new user is created with a password.

• the field in pg_hba.conf tells what kind of authentication scheme should be used when a client that matches the rules attempts to connect.

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When connecting with a client that does not support SCRAM authentication:

If the first line that matches in pg_hba.conf for this connection attempt has, in the METHOD field:

• scram-sha-256, the connection will be rejected.

• md5 and the password of this account is stored with an md5 hash (independently of password_encryption), the connection will succeed.

• md5 and the password of this account is stored with an scram-sha256 hash (independently of password_encryption), the connection will be rejected.

A superuser can check what kind of password is assigned to existing accounts by looking at the hashed passwords in the system table pg_catalog.pg_authid.