Hi,
Azure AD authentication is being used to authenticate the Dynamics 365 Business Central users / Dynamics NAV users so that they can get in to the ERP application. We allow usernames or windows user accounts to be linked to the Office 365 mail address (AAD account / Office 365 account).
Another discussion seperate from this.
We do indeed recommend from security perspective to use a domain user to account as the service account:
docs.microsoft.com/.../provision-server-account
NETWORK Service Account is also possible but not recommended or a local computer account (MACHINENAME\username). That account must have logon as a service assigned.
It is indeed as simple as that.
Thanks.