It appears you don't have the SHA256 kernel module loaded.
Try running: modprobe sha256
To load the sha kernel module.
If the modprobe command fails, verify you have the file (/lib/modules/2.6.XX-XX-XXX/kernel/crypto/sha256.ko)
Then try the luksFormat command again.
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[foo]
More information about formatting options
RE: Cryptsetup
It appears you don't have the SHA256 kernel module loaded.
Try running: modprobe sha256
To load the sha kernel module.
If the modprobe command fails, verify you have the file (/lib/modules/2.6.XX-XX-XXX/kernel/crypto/sha256.ko)
Then try the luksFormat command again.