Password attribute and best practice question

Password attribute and best practice question

Hi I noticed %password% for user accounts can be used in areas, such as the new account creation with custom script (passed as an argument).
Where does the %password% variable source from? Is there an encrypted database within ADManager where user password are stored? Is it all passwords or just the ones that are created? 

Also on a different note, what's your recommended ways of communicating the first time sign in AD password to a new-hire in your company? 
Would you print it out onto paper for them? E-mail to their manager? 

Thanks and the product is wonderful so far
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