What does a user account do?

A user account associates a textual user name with a numeric user ID and group ID, a login password, a user's full name, a home directory, and a login shell. This data is stored in the /etc/passwd and /etc/shadow files, where it's accessed by login utilities as well as by other applications that need user-account information.

Note: User names and passwords are case-sensitive.

User accounts let:

Groups are used to convey similar permissions to groups of users on the system. Entries in /etc/passwd and /etc/group define group membership, while the group ID of a running program and the group ownership and permission settings of individual files and directories determine the file permission granted to a group member.

When you log in, you're in the group specified in /etc/passwd. You can switch to another of your groups by using the newgrp utility.