Explanation/Reference:
Explanation:
Synchronized identity is the simplest way to synchronize on-premises directory objects (users and groups) with Azure AD.
While synchronized identity is the easiest and quickest method, your users still need to maintain a separate password for cloud-based resources. To avoid this, you can also (optionally) synchronize a hash of user passwords to your Azure AD directory. Synchronizing password hashes enables users to log in to cloud-based organizational resources with the same user name and password that they use on-premises.
Azure AD Connect periodically checks your on-premises directory for changes and keeps your Azure AD directory synchronized. When a user attribute or password is changed on-premises Active Directory, it is automatically updated in Azure AD.

Federated identity:
For more control over how users access Office 365 and other cloud services, you can set up directory synchronization with single sign-on (SSO) using Active Directory Federation Services (AD FS). Federating your user's sign-ins with AD FS delegates authentication to an on-premises server that validates user credentials. In this model, on-premises Active Directory credentials are never passed to Azure AD.

Reference: https://docs.microsoft.com/en-us/azure/active-directory/choose-hybrid-identity- solution#synchronized-identity