It's a long, random password, that you generate anew for each application that needs it: one compromised app can be revoke quickly without affecting other. But

It's a long, random password, that you generate anew for each application that needs it: one compromised app can be revoke quickly without affecting other. But more importantly, app password can only be used for email, not other Google's service, so even if it gets leaked, the impact is severely reduced.