Unfortunately, it’s kind of a mess. iCloud Keychain does
accomplish the most basic things you’d expect a password manager
to do, but it often does so in an awkward manner. Important
functionality is hard enough to find that it may be effectively
hidden from the average user, particularly on iPhones and iPads.
Ultimately, iCloud Keychain can be put to good use if you’ve
carefully examined what it does well and doesn’t do well. It works
best as a complement to a complete service like 1Password or
LastPass, but it just isn’t convenient and robust enough to act as
a standalone password manager.
I think it’s a bit harsh to call it a “mess”, but Brodkin provides a good overview of what iCloud Keychain does. Complaining that it’s not as full-featured as 1Password is like complaining that iPhoto doesn’t do everything Lightroom or Aperture do.