On these screens, you configure the security features you want to enable on your iPhone. They are optional, but I strongly recommend you use at least one, though I recommend using both.
NOTE: If you're setting up your phone using a different operating system—iOS 8, for instance—this step is later in the process.
Touch ID
This option is available only to iPhone 6S Plus, 6S, 6 Plus, 6, and 5S owners: Touch ID.
Touch ID is the fingerprint scanner built into those devices' Home button that allows you to unlock the phone, use Apple Pay, and buy at the iTunes and App Stores with just your fingerprint.
It may seem like a gimmick, but it's surprisingly useful, secure, and efficient. If you want to use Touch ID, place your thumb on your iPhone's Home button and follow the onscreen instructions. You can also choose Set Up Touch ID Later.
Passcode
The final security option is to add a Passcode. This is a six-digit password that has to be entered when you turn on your iPhone and prevents anyone who doesn't know it from using your device. It's another important security measure, and can work together with Touch ID.
On the Passcode screen, the Passcode Options link offers different settings, including using a four-digit passcode, creating a passcode of custom length, and using a password instead of a code.
Make your choices, set your passcode, and continue to the next step.