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An app password is a long, randomly generated password that you provide only once instead of your regular password when signing in to an app or device that doesn't support two-step verification. You only need to create an app password if you have two-step verification turned on and are using an app that doesn't support it. Some older, non-browser apps like Office 2010 or earlier and Apple Mail before iOS 11 don't understand pauses or breaks in the authentication process. An Azure Active Directory Multi-Factor Authentication (Azure AD MFA) user who attempts to sign in to one of these older, non-browser apps, can't successfully authenticate. To use these applications in a secure way with Azure AD Multi-Factor Authentication enforced for user accounts, can use app passwords.
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