The NTLM authentication protocol is used by Windows NT clients to connect to servers running previous versions of Windows NT. For example, NTLM authentication is used to connect to a remote file share on a Windows NT 4.0 server, or when a Windows NT 4.0 client connects to a new version of Windows NT file share. NTLM credentials consist of the domain name, user name, and encrypted password that is entered once during the initial logon to Windows NT.
The security services on a domain controller manage a secure copy of the NTLM user credentials in the Windows NT Directory Service to use for NTLM authentication. A new version of Windows NT workstation or client will manage the NTLM credentials entered at system logon on the client side to use when the client connects to Windows NT 4.0 servers using NTLM authentication. Support for NTLM credentials in the next revision of Windows NT security will be the the same as for Windows NT 4.0 for compatibility.