Hi, Matt.
For each user it's expected to serve, Gluu requires a local user entry to exist in its own internal LDAP server. This entry keeps cached user attributes (sometimes gathered from several sources and pre-processed in some way) in one place. It's still true even in cases when actual authentication will happen via some other means (LDAP bind to some backend LDAP server, custom auth script etc).
Cache Refresh is intended to be used with LDAP authentication against an existing LDAP backend server. It automates import and modification of its user entries into Gluu's LDAP server. As authentication still will happen against the backend server, no password is usually needed to be stored in Gluu in such scenario.