Wi-Fi configuration profile -- enterprise.

You will probably need these three options and want Enterprise security and may need to make sure the right protocols are selected for the network ie: PEAP
Auto Join
Use as a Login Window configuration
Use Directory Authentication

It is also worth noting at this point that there is a fairly common bug in 10.10 and automatic WiFi for AD where the autojoin on wake from sleep doesn't work properly. It appears to be resolved in 10.11 and wasn't present in 10.9 but there is currently no proper fix for 10.10, you can do things like drop to the Login Window from fast user switching to reconnect or go into the Network Preferences and reconnect there (it will prompt for password again).

how does 'Use Directory Authentication' (Authenticate with the target computer's directory credentials) process work ?
these laptops are not part of Active Directory.

if i have 'Use Directory Authentication' unchecked, i am provided with 2 additional areas to fill out information.

-- Username 'Username for connection to the network'
-- Password 'Password for the provided username'

what 'username' 'password' should go here ?

Sorry I missed the not bound to AD bit...
Not certain but I think if you want to use Login Window authentication the devices will probably need to be bound to a directory service of some sort, otherwise you have no garauntee that the username & password being entered is valid for the Wi-Fi.
Whether the username:password option is available or not depends on the protocol you have selected, we are using PEAP for example and this doesn't request it.

we are using PEAP also. If 'use directory authentication' is checked no username/password is requested.

If 'use directory authentication' is NOT checked username/password is requested.

is it authenticating to the Wi-Fi based on the computer being AD bound? is so, how does that work? what credentials does it use.

or does it authenticate to the wi-fi based on the users login/password ?

I've only ever tried PEAP auth and login window auth with AD joined Macs but I'm pretty sure it's a pre-requisite. The user enters their username and password at the login window, these credentials are used to connect to the wireless (or wired) network, and then used to authenticate the user at the login window.

If the Mac isn't joined to the directory the login window will just shake.

thanks @davidacland

I'm trying to understand the process that wi-fi config profile takes, before i even test it.

is this considered 802.1x ?

Correct, this would be 802.1X