Active Directory

Active Directory has numerous advantages, not the least of which is that it can handle any size of installation, from a single server with a few hundred objects to thousands of servers and millions of objects. Active Directory also greatly simplifies the process of locating resources across a large network. The Active Directory Services Interface (ADSI) allows developers to "directory-enable" their applications, giving users a single point of access to multiple directories, whether those directories are based on LDAP, NDS, or NT Directory Services (NTDS).

In Windows 2000, Active Directory integrates the Internet concept of a namespace with the operating system's directory services. This combination allows the unification of multiple namespaces in, for example, the mixed software and hardware environments of corporate networks?even across operating system boundaries. The ability to subsume individual corporate directories into a general-purpose directory means that Active Directory can greatly reduce the costs of administering multiple namespaces.

holymaloly. how wonderful was that answer.
Active directory is a place to list things on your network. As such it is a place to find things when you need them. In win2k networking it is supposed to have all the info and the ability to allow whatever is needing the item to find it. In reality, it does not work as easy as that.

If you are familar with NT4, it replaces the Security Accounts Management, and Master-Slave domain controller functionality, with a new directory management and muli-master (you can make changes on any DC) functionality.
More flexible then NT4 and its goal is a "one-stop" shop for all items and applications in your Network.