<?php
// remember - the suffix of the hook should contain specific form id!

add_action( "gform_pre_submission_3", "wp_doin_pre_submission" );

function wp_doin_pre_submission($form) {

	// get the user created arguments and store them in an array
	// each of the $_POST elements should be read from the form visual editor
	$username = esc_attr( $_POST['input_1'] );
	$email = sanitize_email( $_POST['input_2'] );

	// if we're doing a cron job let's forget about it
	if ( defined( 'DOING_CRON' ) || isset( $_GET['doing_wp_cron'] ) )
		return;

	// let's check if a user with given name exists
	// we're already doing that in the form validation, but this gives us another bridge of safety
	$user_id = username_exists( $username );

	// let's validate the email and the user
	if ( !$user_id and email_exists( $email ) == false ) {

		// let's generate a passowrd
		$random_password = wp_generate_password( $length = 12, false );

		// let's create a new user
		$user_id = wp_create_user( $name, $random_password, $email );

		// let's notify the new user
		wp_new_user_notification( $user_id, $random_password );
	} else {
		// validation failed
		return;
	}
}