I think you’ll still need a password on your account for cases where no passkey is available, and possibly for other scenarios of heightened fraud risk. That’s why the setting they’re describing in the blog post is named “Skip password when possible”.

Disclaimer: although I worked for Google many years ago in a role entirely unrelated to Google account authentication, I have no inside info on this announcement, could be wrong about what I say in the first sentence of this comment, and am not speaking for Google here.