The digispark key acts as a keyboard and launch password manager (UniquePasswordBuilder here) via a shortcut, then type master password, then paste the password in the current field. I know it’s very vulnerable to physical attack (because you can easily capture master password) but it will help my grandma to use a different and strong password for each site, instead of the same basic password. It’s a tradeoff but I think it’s more likely her passwords got leaked instead of that digispark being stolen.
Digispark source code is here : https://github.com/paulgreg/digispark-upb
The password manager used is UniquePasswordBuilder, more info here : https://paulgreg.me/UniquePasswordBuilder/