When you email a financial statement, an HR letter or a private contract, anyone who intercepts or is forwarded that message can open the attachment. Adding a password ensures that only people who know it can read the document.
A PDF can carry two kinds of password. A user (open) password is required to view the document at all. An owner (permissions) password controls what a reader can do — such as printing or copying text — without necessarily blocking them from opening it. For truly private files, set a user password.
On ColaPDF the encryption happens entirely in your browser, which means your unprotected file is never uploaded to a server where it could be exposed. The document only leaves your device after it has already been encrypted — by you.