A JID is a Jabber ID, the Jabber address of a user composed of username@host.domain. When you create a new user you choose the user name, the host.domain part is defined when you setup Openfire.
Whether you use an external or the internal database users can also register with their clients to create a new account (unless you disable this feature).
I think that “Whether you use an external or the internal database users can also register with their clients to create a new account (unless you disable this feature).” is not right. The “external database” connectors are as far as I know read-only and thus only the default database allows user registration using a client.