This settings is used to determine whether a user is an Office 365 user or not, assuming that the user’s login name is equal to the User Principal Name which is equal to the user’s email address.
To see your custom domains you can navigate to the Azure Portal > Azure Active Directory > Custom domain names.
Enter here your default (cloud-only) O365 domain e.g. mycompany.onmicrosoft.com.
Mandatory, if you have not added your own domain to Microsoft Office 365 or if both domain users and cloud-only users should be able to sign into your website using the plugin.