I can't quite explain how the password dialog appeared out of no-where without actually setting one.
But I can tell you what it's for
FlashFXP offers a security feature (Application Password Protection), which can be set from the main menu, Sites > Security. Once a password is set a password dialog will appear on startup prompting for validation before allowing FlashFXP to run.
The only way for this dialog to appear is if a password was set.
From within FlashFXP the password can be cleared (disabled) from the same Security menu.
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