Microsoft states:

In order to authenticate a user, the server sends down a plain text challenge to the browser. Once Microsoft Edge is able to verify the user through Windows Hello, the system will sign the challenge with a private key previously provisioned for this user and send the signature back to the server. If the server can validate the signature using the public key it has for that user and verify the challenge is correct, it can authenticate the user securely.

These keys are not only stronger credentials – they also can't be guessed and can't be re-used across origins. The public key is meaningless on its own and the private key is never shared. Not only is using Windows Hello a delightful user experience, it's also more secure by preventing password guessing, phishing, and keylogging, and it's resilient to server database attacks.