In this dialog you may enter a default password, which will apply to the add, extract, test and view operations.
If the "Show password" option is disabled, you will be asked to type the password twice to ensure correctness.
If you set "Encrypt file names" option, WinRAR will encrypt not only file data, but all other sensitive archive areas like file names, sizes, attributes, comments and other blocks, so it provides a higher security level. Without a password it is impossible to view even the list of files in archive encrypted with this option. This option makes sense only when compressing data to RAR archive, it is ignored when the default password is used to decompress data or to compress to ZIP.