Design Considerations for Compatibility
In Windows Server 2003, each forest and each domain within a forest can be assigned a functional level. The functional level for a forest is referred to as the forest functional level. The functional level for a domain within a forest is referred to as the domain functional level.
Inside Out: Functional levels affect compatibility
Functional levels affect the inner workings of Active Directory and are used to enable features that are compatible with the installed server versions of the Windows operating system. For backward compatibility with previous versions of Windows, Active Directory is configured by default ...
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