The Password, like everything in the Golden Dawn tradition, is more than just a word used to distinguish initiates from non-initiates - it has magical reasons and applications that far surpass its mundane purpose.
At each Equinox the Password is changed. The Hiereus explains why this occurs: "The password ... will be periodically changed at each Equinox so that a member who has resigned, demitted or been expelled from the Order, may be in ignorance of the existing password."
This is the practical reason, which makes sense and ties in with the Masonic roots of the practice. It was likely particularly useful in the Victorian era when members may have been travelling long distances and would not have had the luxury of internet groups from which they could get to know people — leaving the Password as one of the primary forms of knowing who was or was not an initiate for those who had not met before.
But magic underscores all that we do, and while much of our ritual technique comes from Masonic convention, the additional layer of magic is what makes it the Golden Dawn.
The Password is, in many ways, a temporary magical motto for the Order, and just as the motto represents the spiritual and magical goals of the initiate, so too does the Password represent the spiritual and magical goals of the Order for the period it is in use.
The Chiefs of the Order or Temple may choose a Password in a variety of ways, such as a more passive form via divination (like the Ring and Disc), which can be opened with an invocation to the Guardians of the Hidden Knowledge and the egregore of the Order, allowing it to suggest a word that will best suit what is needed at the time.
A more active technique is also possible, where the Chiefs may decide upon a specific short-term goal for the group, depending on the specific issues or aspirations noted at the time.
The ramifications of the Password chosen may also be explored through divination, and a combination of active and passive techniques can be employed to find the most appropriate word to install at the Equinox.
There are many magical applications of the Password for all members as well. It connects them to the egregore of the Order and can be employed on a regular basis as part of a connection rite. It can also be used literally as a password to get into an astral temple.
We are tasked in the Oath to not discuss anything pledged to secrecy with anyone unless "they are in possession of the password for the time being." The Password, therefore, is that mystical word with which we bridge the silence of a primal sleep. It is the lock that keeps the secrets safe, and also the key to unlocking those secrets, for it is the word spoken to the Sentinel on approaching the temple doors, the word that bars and opens.