Microsoft® Windows® XP Networking and Security Inside Out: Also Covers Windows 2000

Workgroups vs. Domains

Computers on a Windows network can be joined together in a workgroup or in a domain.

In a workgroup, the security database (including, most significantly, the list of user accounts and the privileges granted to each one) for each computer resides on that computer. When you log on to a computer in a workgroup, Windows checks its local security database to see whether you've provided a user name and password that matches one in the database. Similarly, when network users attempt to connect to your computer, Windows again consults the local security database. A workgroup is sometimes called a peer-to-peer network.

By contrast, a domain consists of computers that share a security database stored on one or more domain controllers ...