With this milter enabled (and sendmail.cf configured to use it), sendmail checks with the milter to learn if the user exist (or an alias). If not, the mail is rejected immediately.
If the vdomain has a fallback destination configured, the milter let the mail go.
An init script called vdomaincheck is delivered to start/stop the milter.
gives access to a form requesting the email address (not just the user id). From the email address, the form operates on the proper vdomain.