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Public Publishing
If you mark a picture as "Published-Public", then it is accessible to anyone who knows your e-mail address (and logs in as a guest of your account). Pictures that are published to the public will have a globe indicator on the upper-left of the thumbnail. Generally, you mark pictures as public if you want to make it easy for family and friends to view certain pictures without using invitations. If you want to ensure that no one else sees them, then you should probably mark them as private.
Private publishing
If you mark a picture as "Published-Private", then only people who get an invitation (with the appropriate settings) can access these pictures. People who login as a guest of your account will NOT see the private pictures.
You should NEVER give out your account password as a means to share your pictures. Either mark your pictures as public (so friends can login as guests), or send invitations to your private pictures. Anyone who has your password can modify or remove any of your account information.