A factory reset AKA a hard reset returns a device to "fresh from the box" state, i. e. the state it was in when first purchased. A subsequent power up will yield a request to set a new password. The process "wipes the phone" of any data change since the box was first opened. That process might be desirable if reselling a phone or discarding it. A user guide may detail the procedure for a particular brand of phone.
This is a bit different from "recovering a lost password" or defeating a screen lock.
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