Using KEY Authentication

Generating public/private dsa key pair.
Enter file in which to save the key (/home/localuser/.ssh/id_dsa): 
Enter passphrase (empty for no passphrase): 
Enter same passphrase again: 
Your identification has been saved in /home/localuser/.ssh/id_dsa.
Your public key has been saved in /home/localuser/.ssh/id_dsa.pub.
The key fingerprint is:
93:58:20:56:72:d7:bd:14:86:9f:42:aa:82:3d:f8:e5 localuser@mybox.home.com

It will prompt you for the location of the keyfile. Unless you have already created a keyfile in the default location, you can accept the default by pressing 'enter'.

Next it will ask you for a passphrase and ask you to confirm it.

The reason why you would generate a keyfile is so that you can increase the security of your SSH session by not using your system password. When you generate a key, you are actually generating two key files. One private key and one public key, which is different from the private key. The private key should always stay on your local computer and you should take care not to lose it or let it fall into the wrong hands. Your public key can be put on the machines you want to connect to in a file called .ssh/authorized_keys. The public key is safe to be viewed by anybody and mathematically cannot be used to derive the private key. Its just like if I gave you a number 38,147,918,357 and asked you to find the numbers and operations I used to generate that number. There are nearly infinate possibilities.

Whenever you connect via ssh to a host that has your public key loaded in the authorized_keys file, it will use a challenge response type of authentication which uses your private key and public key to determine if you should be granted access to that computer It will ask you for your key passphrase though. But this is your local ssh process that is asking for your passphrase, not the ssh server on the remote side. It is asking to authenticate you according to date in your private key.