The generator sits beside the password field whenever you add or edit an entry, and on its own screen from the side menu. It makes passwords or passphrases.
Why this matters
A password you invented is a password you can remember, which is the same thing as a password someone can guess. Generated ones are only practical because the app remembers them for you.
Steps
While adding or editing an entry, tap the cube icon beside the password field, next to the eye.
Choose Password or Passphrase, then set Password Length and what to include.
Tap Generate until you are happy with it.
Tap Use This Password to drop it into the entry.
Save the entry.
What happens next
The password is placed in the entry. Save it, then change it on the website itself — the generator does not do that for you.
If it does not work
password length must be more than 6
Good to know
Length matters more than symbols. Twelve characters is a reasonable floor, sixteen is better.
There is also a generator on the DroidPass website if you need one on a computer.