This is for setting up a passphrase. A passphrase is an additional word, phrase, or string or characters which you can choose manually, which is needed to unlock your wallet. With Ledger, you can either enter the passphrase manually every time you wish to use it ("Set temporary passphrase"), or you can set up a secondary PIN with the passphrase linked to this PIN ("Attach to PIN code"). Bear in mind that if you lose your passphrase/forget your PIN, you will be unable to recover your coins (unless your passphrase was weak and brute-forceable). There's more information about this here: https://support.ledger.com/hc/en-us/articles/115005214529-Advanced-passphrase-security

Yes. If you wished to restore a wallet created on a Ledger device with a passphrase to Electrum, then you would create a new Electrum wallet, click "Standard wallet", then "I already have a seed". In the first box you would enter your 24 word seed phrase. Before clicking next, you would click on "Options", and tick both "Extend this seed with custom words" and "BIP39 seed". In the next box, titled "Seed extension", you would enter your passphrase.