1. When troubleshooting an account, you may find it necessary to login on an email/IM client. The temporary password can be used for this since impersonation is not available. You'll also find that some behavior in webmail may be slightly different if you are impersonating versus directly logged into the account - certain menus will show for the sys admin impersonating that wouldn't be available to a user. For example, when you impersonate a user, the domain admin's settings always show, even if you're impersonating a user that isn't a domain admin. If you want a clear idea of the options available for the user, you may wish to log in directly instead.
2. It does not disable the user's password. Instead, it creates an additional, temporary password that is only available for the time you indicate. If you are logged in with the temp password, it will not impact a user's ability to access webmail using their own.
I hope this helps!