Basic SMTP doesn't require auth at all. SMTP-AUTH is defined in RFC 4954 but it doesn't define the specific type of auth you're using here 'auth login'. It does say.
A server implementation MUST implement a configuration in which it does NOT permit any plaintext password mechanisms
I can't find a specification for 'AUTH LOGIN', though googling it indicates its most likely a Microsoft exchange only feature. Further googling indicates your example is directly copied from here.
If you're asking why the particular example is base64 encoded, its because Microsoft has a dumb interpretation of the RFC's prohibition on cleartext. If you want to know why other SMTP auth mechanisms use base64, its because typically the data they're sending is actually binary data of some sort (like a MD5 hash of the shared secret and a token provided by the server). If this doesn't answer your question, please edit your question to include more details.