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Stores the new user and blog details in the database and calls wpmu_signup_blog_notification to email the new user an activation link.
To help clarify the purpose of $domain and $path, in the activation email their are used as so...
I suspect this this helps make the code more generic as there are three possible ways to setup WordPress MU that I am aware of...
<?php wpmu_signup_blog($domain, $path, $title, $user, $user_email, $meta); ?>
wpmu_signup_user does the same thing except that it only stores the new user details as is called when the user does not signup for a blog at the same time.
wpmu_signup_blog_notification sends an activation email to new users after they have completed the signup process, it includes their activation link.