SQL Server cannot set application role after changed password

Question

Originally, my application can change application role by command.

exec sp_setapprole 'ARole', {ENCRYPT N'PASS01'}

And after I changed the application role's password to 'PASS02', I found

exec sp_setapprole 'ARole', {ENCRYPT N'PASS02'}

wouldn't work and returns an incorrect password.

I found it works after I changed the code to

1)   exec sp_setapprole 'ARole', 'PASS02' 
    -- or  -- 
2)   exec sp_setapprole 'ARole', 'PASS02', 'ODBC'

What puzzles me is why the original code is working? And how the password was set at the first place ?