When you run the command, it sets all the required information about the AD FS to Azure AD for the federated domain. It also creates a relying party trust for the Azure AD to the local AD FS server. When a user is authenticated on AD FS, it creates a security token including claims about the user’s identity. With Azure AD, two claims are used for authentication; UserPrincipalName and ImmutabledId. Basically, the ImmutableId could be any string, as long as it matches the ImmutableId attribute of the user object in Azure AD. Typically the ImmutableId is a base 64 encoded GUID of the user object in on-premises AD (to convert GUID to immutable ID see the tools page). Converting the domain to federated also creates two claim issuance rules. For short, the rules add the UserPrincipalName and ImmutableId claims of the logged in user to the security token. When security token is delivered to Azure authentication platform, it checks the token signature, and if it matches the trust, the user is granted access