Desktop backup password
This setting allows you to specify a password which will be used to encrypt full desktop backups you perform over USB.
Android's USB debugging feature includes a relatively hidden option allowing you to perform a full backup of your Android device to a desktop computer via the USB cable. USB debugging must be enabled to use this option.
The Desktop backup password option allows you to set a password used to encrypt these backups. If you do use such a password, it is important that you remember it or keep a record of it as there will be no way to recover your backups or change the password without it.
How to perform a full desktop backup over USB
The ADB tool, supplied by Android to developers, can be used to initiate a full desktop backup from your attached computer.
Specifically, the ADB command you need to use to create the backup from the computer is
adb backup. Further options can be specified for this command as described in this forum post.
When you attempt to initiate a backup from your computer, a pop-up message will appear on your device asking you to confirm that you want to proceed.