If you are creating a specific site, you wouldnt want anyone Tom and Harry to be able to register in the site. Also you would not want the burden of adding users completely on the admin. The best solution for that is to allow existing users to Invite other users. This will ensure that any time you always have users who are linked to each other.
To enable this feature, you need to enable Invite module, http://drupal.org/project/invite. The settings are very basic. After enabling the invite module, you will have a Invite tab under User management. Change the settings as you want. Also after this, make sure that you go to User settings and change the Public registrations: to “New user registration by invitation only.” This should enable already existing users to see a link “Invite a friend” on their main menu.
Now I need to find out how to restrict the number of invites per user.