The hard truth is that storing a password in a desktop application, 100% securely is simply not possible. However, you can get close to 100%.
Regarding your original approach, PasswordVault uses the Credential Locker service which is built into windows to securely store data. Credential Locker is bound to the user's profile. Therefore, storing your data via PasswordVault is essentially equivalent to the master password approach to protecting data, which I talk about in detail further down. Only difference is that the master password in that case is the user's credentials. This allows applications running during the user's session to access the data.
Note: To be clear, I'm strictly talking about storing it in a way that allows you access to the plain text. That is to say, storing it in an encrypted database of any sort, or encrypting it yourself and storing the ciphertext somewhere. This kind of functionality is necessary in programs like password managers, but not in programs that just require some sort of authentication. If this is not a necessity then I strongly recommend hashing the password, ideally per the instructions laid out in this answer by zaph. (Some more information in this excellent post by Thomas Pornin).
If it is a necessity, things get a bit more complicated: If you want to prevent other programs (or users I suppose) from being able to view the plaintext password, then your only real option is to encrypt it. Storing the ciphertext within PasswordVault is optional since, if you use good encryption, your only weak point is someone discovering your key. Therefore the ciphertext itself can be stored anywhere. That brings us to the key itself.
Depending on how many passwords you're actually trying to store for each program instance, you might not have to worry about generating and securely storing a key at all. If you want to store multiple passwords, then you can simply ask the user to input one master password, perform some salting and hashing on that, and use the result as the encryption key for all other passwords. When it is time for decryption, then ask the user to input it again. If you are storing multiple passwords then I strongly urge you to go with this approach. It is the most secure approach possible. For the rest of my post however, I will roll with the assumption that this is not a viable option.
First off I urge you not to have the same key for every installation. Create a new one for every instance of your program, based on securely generated random data. Resist the temptation to "avoid having to store the key" by having it be generated on the fly every time it is needed, based on information about the system. That is just as secure as hardcoding string superSecretKey = "12345"; into your program. It won't take attackers long to figure out the process.
Now, storing it is the real tricky part. A general rule of infosec is the following:
Nothing is secure once you have physical access
So, ideally, nobody would. Storing the encryption keys on a properly secured remote server minimizes the chances of it being recovered by attackers. Entire books have been written regarding server-side security, so I will not discuss this here.
Another good option is to use an HSM (Hardware Security Module). These nifty little devices are built for the job. Accessing the keys stored in an HSM is pretty much impossible. However, this option is only viable if you know for sure that every user's computer has one of these, such as in an enterprise environment.
.Net provides a solution of sorts, via the configuration system. You can store your key in an encrypted section of your app.config. This is often used for protecting connection strings. There are plenty of resources out there on how to do this. I recommend this fantastic blog post, which will tell you most of what you need to know.
The reason I said earlier not to go with simply generating the key on the fly is because, like storing it as a variable in your code, you rely exclusively on obfuscation to keep it secure. The thing about this approach is that it usually doesn't. However, sometimes you have no other option. Enter White Box cryptography.
White box cryptography is essentially obfuscation taken to the extreme. It is meant to be effective even in a white-box scenario, where the attacker both has access to and can modify the bytecode. It is the epitome of security through obscurity. As opposed to mere constant hiding (infosec speak for the string superSecretKey approach) or generating the key when it is needed, white box cryptography essentially relies on generating the cipher itself on the fly.
Entire papers have been written on it, It is difficult to pull off writing a proper implementation, and your mileage may vary. You should only consider this if you really really really want to do this as securely as possible.
Obfuscation however is still obfuscation. All it can really do is slow the attackers down. The final solution I have to offer might seem backwards, but it works: Do not hide the encryption key digitally. Hide it physically. Have the user insert a usb drive when it is time for encryption, (securely) generate a random key, then write it to the usb drive. Then, whenever it is time for decryption, the user only has to put the drive back in, and your program reads the key off that.
This is a bit similar to the master password approach, in that it leaves it up to the user to keep the key safe. However, it has some notable advantages. For instance, this approach allows for a massive encryption key. A key that can fit in a mere 1 megabyte file can take literally billions of years to break via a brute force attack. Plus, if the key ever gets discovered, the user has only themselves to blame.
In summary, see if you can avoid having to store an encryption key. If you can't, avoid storing it locally at all costs. Otherwise, your only option is to make it as hard for hackers to figure it out as possible. No matter how you choose to do that, make sure that every key is different, so even if attackers do find one, the other users' keys are safe.
