The password is only used when it comes to linking a new theme league to a previous multi-season league.
There is an option in the Theme Wizard on the League Rules page to handle setting up or continuing a multi-season league. It is the very top option on the League Rules page. In order to continue a multi-season league, you will need the password which only the commissioner should or needs to know, and can be found in the Theme Summary section on the League Office page, and you will also need the most recent league number.
Once you put those two items in and attempt to change the page, it will verify that the password and previous league number are valid and, if so, link up the new theme to the previous themes. You will know if it is linked to the previous seasons because anytime you go to that League Rules page, it should have the password saved in it.