Database users’ passwords are stored in the database’s data dictionary. When a user attempts to log into the database, the user’s usernames and passwords are compared to the values contained in the database. The user is given database access only if the username and password match.  The data dictionary is stored in the database and can be accessed as long as the database is available. The dictionary also contains the passwords for the administrators.
The data dictionary would be unavailable until the database is locked. Since starting up a down database is one of the administrator’s jobs, there needs to be a way for them to log in even if the database is locked. Password file helps in this situation. A password file is an operating system file that is held on a separate disc from the database. It stores the username and password for users with SYSDBA or SYSOPER privileges. When the database is down,  administrators with certain privileges are authenticated using the password files.