Anonymous FTP is a service that does not require a unique username and password to log in. Any user can log in using the username "anonymous" and typically use their email address as the password. Some anonymous FTP services allow the password field to be left blank. DreamHost allows this feature as well.
In comparison to a standard FTP user created in the panel, an Anonymous FTP user is generally used to upload/download content to a directory on your domain defined by you when setting up the service. This service can be very useful if you require multiple users to upload/download files from your domain.
Keep in mind that Anonymous FTP is ideal for providing users access to files that are public on your domain and should not be used to access any of your web applications.
Once you have defined all your directory permissions for Anonymous FTP users, your standard FTP/Shell user still have access to manage all files where you have set up the Anonymous FTP service.
For example, using the Basic Configuration, your standard FTP/Shell user can view/download/delete/move any uploaded files in ‘incoming’ and even move them to /(root). The FTP/Shell user is essentially the “file manager” for the Anonymous FTP service.
An important note about making changes to directories
Although you can manage files using your FTP client when logged in as the user that is hosting your Anonymous FTP service, DO NOT MAKE, DELETE, OR RENAME DIRECTORIES! Those functions should ONLY be done through the Anonymous FTP page.
Any editing done through a client for Anonymous FTP directories can cause problems with directives and permissions.