Suppose I have 2 Oracle databases running on my machine, and I use ORAPWD utility to create password file. Whether the password file will be used for both databases? Or do i need to store the password file to a specific path so that it is accessible to a particular database only.
You can use a single file, but it is easier to manage multiple files. On unix, the password file gets put in $ORACLE_HOME/dbs - it should have the name as
orapw<ORACLE_SID> (NO . EXTENSION)
This way, you will have a diffferent file for each instance. This eliminates the problem of someone resetting the sys password in one instance without notifying other dba's of the other instances. When the password file is shared, you lose the ability to change the sys password independently in different instances.