When you install Windows SharePoint Services, you must choose which user account mode you want to use. Windows SharePoint Services can work with either of the following user account modes:
Domain account mode:
This mode is used inside organizations to grant users with existing Microsoft Windows domain accounts access to Windows SharePoint Services.Active Directory account creation mode:
This mode is used by Internet Service Providers to create unique user accounts for customers in Microsoft Active Directory directory service. These accounts can then be assigned to groups in Windows SharePoint Services to grant customers the appropriate level of access. Use Active Directory account creation mode when it is necessary to create new user accounts or invite users to collaborate on a Web site where existing domain accounts for those users do not already exist.
When Windows SharePoint Services 3.0 is in Active Directory account creation mode, any user added to a site is automatically added to the Active Directory organizational unit identified for use by Windows SharePoint Services 3.0. When running in Active Directory account creation mode, every application pool that contains one or more sites must use an account that has permissions to create, read, and update accounts in the Active Directory organizational unit that the domain administrator configured for Windows SharePoint Services 3.0.
After you install Windows SharePoint Services, you cannot change the user account mode. This is because the user account you specify during the install process affects how the configuration database for your server or server farm is created, and you cannot change user account modes after creating the configuration database.