The main purpose of login processes is to handle the IMAP and POP3 connections before the user has logged in. The login processes don't need to be able to do anything else than let the user log in, so they can run in highly restricted environment. By default they are run as a non-privileged "dovecot" user chrooted into a non-writable directory containing only authentication UNIX sockets.
Login processes also handle proxying the SSL and TLS connections even after the user has logged in. This way all the SSL code runs in the same restricted environment, which means that a security hole in the SSL library gives the attacker access only to the restricted chroot, rather than possibly all the users' mails.
The default login settings should be good enough for small sites. There are two ways to run the login processes: the high-security mode and the high-performance mode. Both are discussed separately below.
Login process creation
login_processes_count and login_max_processes_count setting control how new login processes are created. login_processes_count specifies the number of login processes that are tried to be kept listening for new connections. However when a lot of connections arrive at the same time this number will increase automatically as described below.
To prevent fork-bombing Dovecot's login process creation works in a similiar way to Apache: Initially set "wanted listening process count" to same as login_processes_count and start the processes. Then check every second if we need to start up new processes to keep the listening process count the same as the wanted count. If all the listening processes have been used, double the wanted count. If we haven't used all of them, decrease the wanted count by one (unless it goes below login_processes_count), but don't destroy already created processes. login_max_processes_count specifies the maximum number of login processes there can exist at a time (listening, non-listening and SSL/TLS-proxying processes combined).
Setting login_process_per_connection=yes enables the high-security mode. This is the default. It works by using a new imap-login or pop3-login process for each incoming connection. Since the processes run in a highly restricted chroot, running each connection in a separate process means that in case there is a security hole in Dovecot's pre-authentication code or in the SSL library, the attacker can't see other users' connections and can't really do anything destructive.
Since one login process can handle only one connection, login_max_processes_count limits the number of users that can be logging in at the same time. Currently SSL/TLS proxying processes are also counted here, so if you're using SSL/TLS you'll need to make sure this count is higher than the maximum number of users that can be logged in simultaneously.
If the maximum login process count is reached, the oldest process in logging-in state (ie. non-proxying) is destroyed.
login_max_connections setting is completely ignored in this mode.
login_process_size should be fine at its default 64MB value.
Setting login_process_per_connection=no enables the high-performance mode. It works by using a number of long running login processes, each handling a number of connections. This loses much of the security benefits of the login process design, because in case of a security hole the attacker is now able to see other users logging in and steal their passwords.
Login process creation rules apply just the same for this mode, but a process is counted as "non-listening" only when it's handling login_max_connections connections already. So a new login process is created only when one of the existing ones has used up all its connections and gone into non-listening state. The maximum number of users logging in at the same time (+ SSL/TLS proxying connections) is login_max_connections * login_max_processes_count.
You should make sure that the process has at least 16 + login_max_connections * 2 available file descriptors. v1.1+ checks this at startup and warns if you don't have enough fds available.
If you're using SSL/TLS you might want to increase the login_process_size. With the default 64MB Dovecot itself should be able to handle a few thousand connections, but SSL libraries might require more.
The number of login processes should be about the same as the number of CPUs on your system. So login_max_connections should be much higher than login_processes_count.