By flattening case, you allow people to enter passwords on a traditional phone keypad. I have seen more than one example of a bank that does this so that customers can have the same password at the website, as they do over the phone.
ie.
password: joe123
on-phone: 563123
This is obviously a significant compromise in security, and limits the password to 24 of the 26 letters in an English alphabet, if you assume really old phones.
In some early systems, in the days of 7-bit connections, if you gave your username in all uppercase, it assumed you couldn't do mixed case, and flattened your password during authentication.
PaSsWoRd
is no more secure thenpassword
orPASSWORD
PaSsWoRd
is more secure as attacker is less likely to make such attempt thenpassword
. It's just not secure enough to use it.