The passphrase is the encryption key. It must match on both sides exactly, and is never sent anywhere.
These settings run on the sharer's device, which is the bottleneck. Higher = more lag/heat for them, not you. If it lags, lower resolution first, then bitrate.
Video/audio buffer are on your PC: more delay for smoother playback (Chrome video max 4s). Keep them similar so sound stays lined up with the picture.