I think it's for helping you determine how many characters you have typed. For those times when you think you may have pressed multiple keys or didn't quite press a key.
This is actually for helping you cope with websites that use masked passwords where they want you to type 3th, 7th and 11th character and you're using a password manager so that makes things funny. So you paste your password into this little box, click on the relevant numbers and you get your numbered characters to type into their "secure" system.
You could try different validation techniques, including starting validation on your rules on keydown event. Then hide when it matches your pattern. etc etc etc