I have used this setting for members of the Administrator group on my server so that their logins are not dependent on LDAP being available.
Members of this group are then authenticated locally using the password set in mendix, rather than being sent to LDAP for authentication. Other users are authenticated through LDAP
This way, if LDAP is misconfigured, or the account used to read it expires etc, I can still log in to the mendix server to make any necessary configuration changes