The big problem with using the same password on multiple sites is that if any of the sites record your password (because of maliciousness or incompetence), they can re-use your password to log in as you on any other site.
Using a security token is more like a password manager with random passwords everywhere than that (the attacker needs to get access to your password manager to get access to your accounts; it's not enough for someone to hack a single site you use), but more secure because it's generally not copyable and the attacker needs physical access to use it. (A virus on your computer can't clone your security token, even if it's plugged in.)