This is the most common scenario in organizations because it is so easy to set up, and although it does not provide a seamless sign-on experience, users still access Office 365 with a single domain password. It synchronizes the user object from the on-premises AD to Azure AD, including the user's password hash.

The following figure illustrates this scenario, using Azure AD Connect on a sign-on process:

To know more about the synchronization process, check the following figure:

To learn more, continue reading from https://docs.microsoft.com/en-us/azure/active-directory/connect/active-directory-aadconnectsync-implement-password-synchronization.