An app password is a fixed password that can be used by an application to access a 365 account or mailbox.
It is useful because the app password will not change and can avoid 2FA. However the app passwords are extremely long an d only available once - this helps keep them secure.
You can generate an app password by logging into your account at office.com and going to:
https://account.activedirectory.windowsazure.com/Proofup.aspx
Then select the "App passwords " tab and create an app password.
NOTE: it will be shown ONCE and ONLY ONCE, if you lose or forget it, you would need to generate a new password.
More information is available here MS365 Manage App Passwords