I am creating a game and I would like to know if it is possible to pause the
game and continue later.

Someone in this forum had mention something about just giving the user a
password at the end of each level, then let them write it down and enter it
next time they play to get straight to that level.

Any other suggestions? Thanks in advance.

well, if the user switched to another application without exiting, flash
automatically goes into a paused state. They can also also choose pause from
the left soft key menu.

As far as saving state goes, you can either have passwords like you mentioned
that are hardcoded into your swf, or you can boil your game state down to a
series of variables and build a server soultion to store the values attached to
an account ccreated by the user (which is more pain than I would want to go
through as a user).

A complex compromise positon would be a save screen like the old nintendo
megaman screens where the there was a grid that you could fill with dots.
while it looked like a random combination, the values actually stood for
individual metrics, and by putting in the combination you were actually setting
all the state variables.