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I recently noticed Shared Folder under New in Active Directory Users and Computers. What is the purpose of creating a shared folder in active directory? Where would it appear to a user?

Server: Windows 2003; Client: Windows XP

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That doesn't share the folder, it simply publishes it in active directory (to make it searchable). You have to have shared the folder first. More details at the following KB article:

http://support.microsoft.com/kb/234582

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