This little piece of technology is called the Blizzard Authenticator, essentially a SecureID chip, its purpose is to add another layer of security to your account. It works by pairing it with your account then when logging into the game you'll enter both your login name and password, but afterwards you're prompted to enter a one time code that is generated at a push of a button on the authenticator.

Why would anybody want to be inconvenienced by having to add another password? Or, why what if I go to my friends house or a LAN center and want to play but forgot my authenticator?
Would you rather your account of 4+ years be hacked into, all of your valuables stolen, and your character transfered to another realm because you didn't want to spend $6.50? Personally, I wouldn't leave my account security to chance, no matter how amazing my anti-virus is, long my password is, or that I copy-paste it everytime I enter it.
I have to say, as a former Blizzard Account Investigator, I've seen some interesting hacks. More importantly, I've seen people lose practically everything on their account because we couldn't find their stuff in the logs. Most of these compromises were foreign in nature but a good majority number of them were account sharing. That's right, you're best friend hacks your account and steals all your stuff, such a nice friend.
Just recently my girlfriend had her account hacked by a "gold farmer" and her items were attempted to be filtered through a number of characters to cover the tracks. While most of these types of hacks were people that bought gold, visited gold selling sites, or maybe downloaded the wrong cookies from an untrusted site; I know she didn't do any of that. She doesn't go to those sites and doesn't even use UI mods. So, how did it happen?
Truth is, I have no idea, and it's that uncertainty which is the reason for getting the Authenticator.
The authenticator is not a way for Blizzard to screw you out of a whole $6.50, it's their way of providing you a way to protect your investment better. My girlfriend was able to get her stuff back, but you may not be so lucky.
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