When you create a database connection, you specify a username and password
to authenticate the connection.
When you select the Deploy Password option, you include the password for this connection with the archives deployed for it, in plain text, in the runtime version of the connections.xml file. The connections.xml file is located in the folder .adf\META-INF in the application.
Typically, you would select the Deploy Password option for development testing purposes only, as it enables you to connect more quickly, and then deselect it again before you deploy your final application.