The fact that you have supplied the correct PRD disk proves to the system that your request to reset your password is authentic. Behind the scenes, Windows will retrieve your PRD private key from the PRD disk and use it to decrypt the encrypted copy of your password on the local machine. The Password Reset wizard will request you to enter a new password and supply the PRD 3.5" disk. The Logon Failed dialog box appears only after users have typed a wrong password and only if they've created a PRD. On domain-joined XP and domain-joined or standalone Windows 2003 SP1 or R2 machines, you can call the Password Reset Wizard from the Logon Failed dialog box, by clicking the Reset button. This particular XP prompt will appear only for users that have created a PRD. When you enter a wrong password on the logon screen of a standalone XP machine, XP will prompt you “Did you forget your password? You can use your password reset disk.” Clicking this phrase will start the Password Reset wizard. The PRD logic then exports the private key to a floppy disk and deletes it from the local system. The PRD logic encrypts the user’s actual password using the public key and stores the result of this encryption in the HKEY_LOCAL_MACHINE\Security\Recovery\ registry key. When a PRD is created, Windows creates a public-private key pair and a self-signed certificate.
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