Your Mozilla account and Firefox Sync allow you to save and sync your logins, as well as let you know if any of your passwords are vulnerable. They both also protect your passwords with encryption so that even Mozilla can’t see them. Meanwhile, Firefox checks your saved websites against a database of breached websites to let you know if your logins are vulnerable. For more information, see Firefox Password Manager - Alerts for breached websites.
If you have a Mozilla account and enabled the Sync functionality, your sync login data (usernames, passwords, hostnames) is fully encrypted once it's created and/or modified. However, Mozilla cannot decrypt your usernames and passwords when they are stored on the sync server.
Firefox Desktop encrypts your passwords locally in your user profile directory using a logins.json file. Firefox Desktop uses simple cryptography to obscure your passwords. Mozilla doesn’t have the ability to see passwords, but Firefox Desktop does decrypt the password locally so that it can enter them into form fields.
For the best security, use a Primary Password to encrypt your passwords. To learn more about how Firefox saves and stores your logins and passwords, see these articles: