OSPF will not send out Hello packets on a Passive interface, and thus will not establish any adjacencies with other routers on that network, even if they are running OSPF. It will, however, advertise that network's IP address on its other interfaces.
So in your case R1 will not even send out hello packets on its interface connected to R2.
So, for eg. if the network between R1 and R2 is 10.0.0.0/24,in that case R1 will advertise 10.0.0.0/24 in its router LSA to R3, rt ? Since there is no ospf connection between the link, so traffic can't be send through that link then whats the use of advertising that network ?
You seem to think that having an interface as passive for OSPF would prevent forwarding traffic over that link. This is not the case. The subnet for the link from R1 to R2 is certainly in R1's routing table, it would be advertised to R3. And if R3 sent something to R1 whose destination was in the subnet of R1-R2 (10.0.0.0/24) then R1 certainly would forward the packet out the interface.
The concept of passive is only about OSPF processing and has no impact on forwarding traffic through that interface.
 note that the passive interface would prevent R3 from learning any routes from R2 (other than the interface that connects R2 to R1).
The difference is that if you do not include the interface in OSPF then that subnet does not get advertised - and no OSPF traffic is sent. If you put the interface into OSPF and make it passive then the subnet does get advertised and no OSPF traffic is sent.
There are circumstances where you want a subnet to be advertised but you may not want to run the protocol on that interface. One example would be a router with a FastEthernet interface for a subnet where there are just user PCs. You want that subnet to be advertised so the PCs are reachable but you may not want to process OSPF on that interface. What would happen if some user ran OSPF on their PC? Do you want them to be able to inject routes into your routing table?
Another example might be a router at the edge of your network. It may have an interface to devices that are not part of your network (perhaps your EBGP neighbor). You want the devices on that subnet to be reachable but you do not want them to be able to form OSPF neighbor relationship and inject routes into your routing table. Passive interface is the solution for this.
We are pleased to announce availability of Beta software for 16.6.3.
16.6.3 will be the second rebuild on the 16.6 release train targeted
towards Catalyst 9500/9400/9300/3850/3650 switching platforms. We are
looking for early feedback from customers befor...
Introduction Featured Speakers Luis Espejel is the Telecommunications
Manager of IENova, an Oil & Gas company. Currently he works with Cisco
IOS® and Cisco IOS XE platforms, and NX to some extent. He has also
worked as a Senior Engineer with the Routing P...
In this session you can learn more about Layer 3 multicast and the best
practices to identify possible threats and take security measures. It
provides an overview of basic multicast, the best security practices for
use of this technology, and recommendati...