Cisco CCNP and CCIE Study Notes

Consider the following debug ouput from debug ppp authentication

*Mar 27 06:06:59.357: %LINK-3-UPDOWN: Interface Serial4/0:0, changed state to up
*Mar 27 06:06:59.477: Se4/0:0 PPP: Using dialer call direction
*Mar 27 06:06:59.477: Se4/0:0 PPP: Treating connection as a callout
*Mar 27 06:06:59.477: Se4/0:0 PPP: Authorization NOT required
*Mar 27 06:06:59.477: Se4/0:0 PPP: No remote authentication for call-out
*Mar 27 06:06:59.537: Se4/0:0 CHAP: I CHALLENGE id 25 len 28 from "Router2"
*Mar 27 06:06:59.597: Se4/0:0 CHAP: Using hostname from interface CHAP
*Mar 27 06:06:59.597: Se4/0:0 CHAP: Using password from AAA
*Mar 27 06:06:59.597: Se4/0:0 CHAP: O RESPONSE id 25 len 28 from "Router1"
*Mar 27 06:06:59.709: Se4/0:0 CHAP: I SUCCESS id 25 len 4

The debug output has some text indicating that authentication is required but then some authentication seems to happen anyway. What must have been configured on the router for such behavior?