When loading or storing private keys, a password might be supplied to protect the private key. The way this password can be supplied may depend on the application. If only one private key is handled, it can be practical to have
pem_passwd_cb() handle the password dialog interactively. If several keys have to be handled, it can be practical to ask for the password once, then keep it in memory and use it several times. In the last case, the password could be stored into the userdata storage and the pem_passwd_cb() only returns the password already stored.When asking for the password interactively, pem_passwd_cb() can use rwflag to check, whether an item shall be encrypted (rwflag=1). In this case the password dialog may ask for the same password twice for comparison in order to catch typos, that would make decryption impossible.
Other items in PEM formatting (certificates) can also be encrypted, it is however not usual, as certificate information is considered public.