When connecting JIRA to an LDAP directory, the User Password Attribute in the User Schema Settings doesn't actually do anything.
For example, I have set it to "foobar". But users are still able to authenticate with their LDAP passwords successfully.

According to the documentation, the User Password Attribute is used for:

The attribute field to use when loading a user's password.

So technically, this is the attribute used to retrieve the user's password for authentication, but JIRA is not following it.

Tested with: OpenLDAP