JSI Tip 7224. How do I raise the domain and forest functional levels that are supported by Windows Server 2003 domain controllers?

Microsoft Knowledge Base Article 322692 contains the following summary:

This article describes how to raise the domain and forest functional levels that are supported by Microsoft Windows Server 2003 domain controllers. Functional levels are an extension of the mixed/native mode concept introduced in Microsoft Windows 2000 to activate new Active Directory features after all the domain controllers in the domain or forest are running the Windows Server 2003 operating system. When a computer that is running Windows Server 2003 is installed and promoted to a domain controller, new Active Directory features are activated by the Windows Server 2003 operating system over its Windows 2000 counterparts. Additional Active Directory features are available when all domain controllers in a domain or forest are running Windows Server 2003 and the administrator activates the corresponding functional level in the domain or forest.

To activate the new domain features, all domain controllers in the domain must be running Windows Server 2003. After this requirement is met, the administrator can raise the domain functional level to Windows Server 2003.

To activate new forest-wide features, all domain controllers in the forest must be running Windows Server 2003, and the current forest functional level must be at Windows 2000 native or Windows Server 2003 domain level. After this requirement is met, the administrator can raise the domain functional level.

Note Network clients can authenticate or access resources in the domain or forest without being affected by the Windows Server 2003 domain or forest functional levels. These levels only affect the way that domain controllers interact with each other.