System Restore is a Windows XP feature that has its roots in Windows ME. It allows users to save all important system files—a process called creating a checkpoint—and restore them later if something happens with the system. It’s essentially a feature that allows users to go back in time and undo all changes to a system.

How it works
System Restore monitors system files and creates checkpoints at the time of significant system events (e.g., driver and application installation) and periodically (every 24 hours). Periodical restore points are only created when the CPU is idle. Additionally, users can manually create restore points through the System Restore utility found in Start | Programs | Accessories | System Tools.

By default, System Restore will use up to 12 percent of a user’s hard drive to store restore points. This means that users can store several restore points on the hard drive, which are ready to be rolled back. The exact number of restore points depends on the available space on the hard drive. Larger hard drives have more restore points that can be saved. When there is not enough space, older points are deleted. All restore points are compressed using NTFS compression.

Enabling System Restore
System Restore is enabled automatically once Windows XP is installed. Keep in mind that System Restore requires at least 200 MB of free space on each partition; otherwise, it is disabled and all previous restore points are lost. When more than 200 MB of free space becomes available, System Restore is turned on automatically.

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