[Dovecot] dovecot non-local users

From the docs:

System without local users

<snip>

Having one uid per user would mean that in case of a security hole in Dovecot, the user still couldn't read other peoples mails. Use this if possible.

I don't quite understand this one. If you aren't a local user, what's the uid all about?

Do I do something like: create a user for mydomain in /etc/passwd (eg: user:domain_dude, home:/var/dovecot) with a valid home/uid/gid. Plug in the uid/gid/home for domain_dude in the authentication and have a data structure of /var/dovecot/%d/%n/Maildir or %h/%d/%d/Maildir where %h = "/var/dovecot" via /etc/passwd.

Something like that?