Few people like to key in passwords all the time.
Once you've logged into your local Active Directory (AD) you probably dont want to provide another set of credentials for your Microsoft Online Service (Windows Azure Active Directory - WAAD) to access eg. your CRM Online data
If you dont want to implement full Directory Synchronization, you can use the password sync to sync passwords between your AD and the WAAD.
When password sync is enabled on your directory sync computer, you will be able to sign into Microsoft cloud services, such as Office 365, Dynamics CRM, and Windows InTune, using the same password as you use when you log into your on-premises network. When you change your password in your corporate network, the change is synchronized to the cloud.
If you run in to trouble setting up password sync between your AD and WAAD, you can check this article outlining common issues that you may encounter when you use the WAAD Sync tool together with password synchronization. It covers the following topics:
Read more here: "How to troubleshoot password synchronization when using the Windows Azure Active Directory Sync tool" - link
Thanks for this intro.