Passkey is some sort of specific unique key to a device allowing to use a pin on a device instead of the password. But which won’t work on another device.
Now I don’t know if that key can be stolen or not, or if it’s really more secure or not, as people have really unsecure pins.
Apple is quite dogmatic in that their implementation demands cross device syncing.
It’s definitely possible to have such an implementation and those will be the most common. You take a very small security risk for a huge convenience factor.
For the more paranoid, device-bound passkeys do not sync. If you lose the device, you will need to go through a recovery procedure.