A homegroup password is created automatically when you create a homegroup
to be able to add/join other computers on your home network to it.
The homegroup password (credentials) is a security measure to prevent unauthorized access to the computers joined in your homegroup. Without the password, a computer will not be able to join the homegroup.
By default, Windows 7 automatically signs in with this password to the computers on the homegroup, but you can change this to where it requires the user to manually enter the homegroup password instead.
Hope this helps,