console auth dir

[Steev]

Can someone explain to me how the console auth dir works?  I see the 
option, but how does something get into there to tell that a local user 
is local and not remote?  What else needs to be setup?  I have been 
looking around on the website, read the Readme, Hacking, and Install 
files, even looked in the ChangeLog, and I still can't figure out it. 
If I missed it somewhere, please let me know, and I will go back and 
re-read.

Thanks!