Resolved
This incident has been resolved.
Monitoring
A fix has been implemented and we are monitoring the results.
Identified
Updated VS Code Desktop Gitpod plugin released - v0.0.37
Investigating
A recent update to the VS Code Desktop access plugin is requesting a password for some users. A known workaround is to ensure that an SSH key is provided, e.g. "ssh-keygen -t ed25519", or by setting "remote.useLocalApp: true" in VS Code user preferences to fallback to the local companion for SSH access.