why can't python unzip a password protected zip file created by winrar using the zip method?

Because you are using it wrong. :) From docs:

ZipFile.extractall([path[, members[, pwd]]])

Extract all members from the archive to the current working directory. path specifies a different directory to extract to. members is optional and must be a subset of the list returned by namelist(). pwd is the password used for encrypted files.

So you should call that this function for ZipFile object, not as static method. And you should not pass name of archive as a first argument. :)

this way it'll work:

from zipfile import ZipFile

with ZipFile('data.zip') as zf:
    zf.extractall(pwd='dg'

EDIT, in newer versions use:

zf.extractall(pwd=b'dg')