XZ holds one file only, compresses slowly and is less widely supported than ZIP. TAR preserves Unix file permissions and is expected by many developer tools. XZ is at home in software distribution where download size matters; TAR is the usual choice for bundling files on Unix systems.
A password-protected archive is refused, since its contents cannot be read without the password. A plain TAR does not compress anything, so expect it to be about as large as the files inside; TAR.GZ and 7z make smaller files. A .xz file holds one file and no folders; that file is unpacked as it is and then repacked into the TAR.