Passing was a response to laws that made race decide a person's rights. Under the one-drop rule, anyone with known African ancestry could be classified as Black. Virginia's Racial Integrity Act of 1924 wrote that rule into law and made it a crime to lie about one's race on a marriage license. People who could pass as white could get jobs, housing, schooling and safety that Black people were denied.
The practice shows how unstable racial categories are. Homer Plessy, the plaintiff in Plessy v. Ferguson in 1896, was legally Black under Louisiana law despite light skin, which is why he was chosen for the test case. Nella Larsen's 1929 novel Passing explored the costs of living a hidden identity, including fear of exposure and loss of family.
The term is now also used for other identities, such as transgender people seen as their gender or disabled people whose disability is not visible. The core idea is the same: a person's safety depends on how others read them.