While dm-crypt/LUKS supports both keys and passphrases, the anaconda installer only supports the use of passphrases for creating and accessing encrypted block devices during installation.
LUKS does provide passphrase strengthening but it is still a good idea to choose a good (meaning "difficult to guess") passphrase. Note the use of the term "passphrase", as opposed to the term "password". This is intentional. Providing a phrase containing multiple words to increase the security of your data is important.