The master password is an overall shared password and is the most sensitive piece of data in the system. It is never used for authentication and is never transmitted over the network. You can choose to enter the master password manually when required, or obscure it in a file.
The master password is the password for the secure keystore. When a new application server domain is created, a new self-signed certificate is generated and stored in the relevant keystore, which is locked using the master password (default password changeit). If the master password is not the default (that is, you have changed it), you are prompted for the master password. After the correct master password is entered, the domain starts.