I have heard that the EAP protocol has authentication capabilities for wireless networks too. But I am not able to get how it is deployed in real time as I know that whenever I need to connect to my router, I just type in the password and it's done but where EAP in that?
It's not in the average home Wi-Fi, not even in SOHO, it's mostly used in enterprise environment, hence the WPA/WPA2 Enterprise...
This is done when you try to authenticate to a WPA/WPA2 Enterprise AP, which mean you need to setup a RADIUS server to process the EAP Auth.
Sometimes also called 802.1x/EAP.
UPDATE FROM COMMENTS
This is in order to enhance security now that the AAA is done trough wired communication and not trough the air (The challenge/response can't be sniffed/cracked)