Taken from: The WordPress MU Manual

There are some situations when people want usernames created without having their own blog e.g. several people just want to post on the same blog.

There are two options for creating the usernames depending on what Site options you’ve chosen:

1. Allow new registrations enabled – users to create their own using your signup page.

For example, http://edutags.net/wp-signup.php

TIP: If one user decides to create all the usernames using your signup page remind them to log out of their account before visiting the signup page.

2. Add New Users allowed – means that blog administrators can create new users using their Users > Add New page

This allows users to enter the username and email address for a person who isn’t a current user. The person will receive an email with their password and login link. They have 48 hours to activate their account.

To add users to a blog:

1. Located the required blog
2. Click on Edit and scroll down right hand column of page to ‘Add A New User’ section.
3. Enter login name, assign role of user and click Update Options

TIP: For this option usernames must already be created!