When enabling password security it opens a underlying checkboxes and input fields. If I then click "Encrypt password" and then unclick "parent" checkbox,
it does not uncheck the underlying checkboxes which is not visible when you unclick parent box. So it looks like it not uses any password security stuff. But it still encrypt password.
This thing made us investigate many hours why not our users could not login anymore, we use ADFS federation for login. So we check the settings and we could see it was not check to encrypt password. But when we tried to open the "parent" cehckbox we saw that "encrypt password" was still checked and it encrypted our passwords. Thats why we could not match the passwords anymore.
If you uncheck the parent checkbox all "childrens" should be false also in my opinion.