Note: This article pertains to Mac OS X Server versions 1.x, which were released prior to May 2001.
This is a result of the merging of two different operating environments. Mac OS X Server is based on Mach/BSD whose UFS (Unix filing system) is completely case-sensitive, while case sensitivity in Mach/BSD applications varies. Mac OS 8 file systems, including Macintosh Standard (HFS) and Macintosh Extended (HFS+) formats, are insensitive to case. That is, a UFS file system allows items named "Bob" and "bob" to exist at the same level, and sees them as separate items. Mac OS Standard- and Mac OS Extended-formatted volumes see "Bob" and "bob" as identical names.
In Mac OS X Server, if user "Bob" exists, and an attempt to create user "bob" is made, "bob" will replace "Bob". Because Mac OS X Setup Assistant also creates home directories for users it creates, it was determined that to force user names and home directories to lower case would help avoid interoperability problems with applications such as mail.