Multiple user logins?

I'm new to this and am confused about setting up users. I have shared our app to two employees internally and one client externally. I had assumed that by adding their email to the users list, the email would be their user name. But no, they all must use the same user name and password to log in. If that's the case, how does Zoho even know they are separate users? If anyone on any computer can log in using the same user name and password, what's the need for sharing the application at all?

What am I missing here?

When I add a user, I would expect they would have separate user names and passwords and different levels of access to the application.

Thanks.