Application Password authentication uses a code that gives an app or device permission to access your Office 365 account. This is a common workaround for accessing a SharePont site which has been secured with 2FA with a 3rd party app that does not yet support Multi-Factor authentication. Your username will take the format of an email address when prompted for login credentials.
To specify Digest authentication, set the
authenticationType property to
Digest in your
spgo.json file, or by selecting the “Digest” option when configuring your local environment with the
SPGO> Configure Workspace command.
Generating an Application Password
from the office support docs…
An app password is a code that gives an app or device permission to access your Office 365 account.
If your admin has turned on multi-factor authentication for your organization, and you’re using apps that connect to your Office 365 account, you’ll need to generate an app password so the app can connect to Office 365. For example, if you’re using Outlook 2016 or earlier with Office 365, you’ll need to create an app password.
You can learn more here