Provisioning users in Office 365

In nutshell, There are two types of users when you try to let them use the any of the Cloud Services including Office 365. Those are

1. Federated  tenant user and 
2. Cloud only user

Federated tenant user are an user from your on-premise Active Directory user with all necessary user object and its attributes such as First Name, Alias,Last Name and email Id. You synchronize all you local Active directory users to Azure through "Azure AD Connect". Earlier famous utility "DirSync" was used  to synchronize the users across your AD to Cloud.

Here is the picture to explain how the AD users are provisioning and access the cloud services.

Cloud only users

If you are not interested to synchronize the active directory users to Azure AD, and still want to use the Office 365 for , you can use the O365 tenant admin page to provisioning the users.

on your admin home page, https://portal.office.com/adminportal/home#/homepage

there you will see the dashboard with tile "Active User" header under click the "Add User" and start to fill the form.