First, on the local machine:
$ ssh-keygen -t rsa
This creates an ssh key. You should only do this once, and you only need to do it if you want to set your own password to use with your SSH key. Here are some good reasons to set a password with your SSH key:
- If someone steals your key files, they can't use them.
- Your password will be stored in the Mac OS X Keychain (like so many others), so you usually won't even have to enter it.
- Passwords make life a little bit safer.