There's a lot of talk going around on the web about the advantages and disadvantages of UAC, or User Account Control. UAC is a technology in the Windows Vista that limits the privilege level of applications.
If you run XP on a home computer, chances are your user account is a member of the Administrators group. By using an administrator account, any application you run can access the entire system, even potentially malicious applications. A much better idea would be to run as a so-called limited user. Such a user can only access its own account settings, but not anything system wide. A limited user also cannot write to (or delete from) critical areas such as the HKEY_LOCAL_MACHINE registry hive, or the Windows folder. In the Unix world, running as a limited user is common practice.
So why do Windows users still run as administrators? This has two main reasons:
Windows Vista contains technologies to alleviate both points, but this post focuses on the first. UAC is the system that helps with performing administrative tasks. Whenever a limited user in Vista wants to do something that requires administrative rights, UAC will prompt the user for administrator credentials and the user can easily elevate to perform the action.
UAC also does something else however. It also imposes these restrictions on members of the Administrators group. With UAC enabled, even administrators are really limited users in disguise. Only the built-in Administrator account (which is disabled by default in Vista) is exempt from this. The only difference between a limited user and an administrator in Vista is that an administrator doesn't need to type a password to elevate, (s)he can just click "Continue". And it is this that a lot of people object to. They feel that they should be allowed to be real administrators, that they shouldn't need to explicitly allow it every time they want to do something that requires administrative rights.
It's here that the confusion starts. Many people assume that UAC's primary purpose is to alleviate the Dancing Bunnies Problem. Sure, it is definitely one of the goals of UAC and it may even help a little, but it is not the primary purpose of UAC in my opinion. After all, as Larry Osterman says, if the user wants to see the dancing bunnies, he will see the dancing bunnies. It doesn't matter if an extra "Continue" button is in the way.
UAC's true purpose is to achieve the principle of least privilege. This old principle says that nothing running on your computer should have more privileges than it needs to execute its task. In XP, this is not the case, everything you run has the same privileges as your account, and as I explained above, this usually means administrator privileges.
So UAC wouldn't help if an application claims to need administrative rights and can trick the user into agreeing to that. But UAC will protect security sensitive applications that don't need administrative rights. Applications such as Internet Explorer and Outlook or Windows Mail don't need administrative privileges for anything, they just read your mail. Yet in XP, these applications get administrative rights if you have them. Applications such as this are under frequent attacks, and unfortunate as it may be, bugs will be found and exploited with malicious intent.
It's here that UAC helps. In XP, if some code in an e-mail manages to exploit a bug in Outlook to run arbitrary code, this code has the same rights as the user, so typically administrative rights. This means this malicious code can access all your data, all your system settings and files, and can change anything it likes. In other words, you're screwed.
Under Vista, Outlook doesn't specify it needs administrative rights so UAC doesn't ask the user anything, and Outlook will be run with reduced rights. Now the exploit does not have elevated privileges. It can attack your account at best, but your system and applications are safe.
UAC also allows some applications to reduce their privilege level even further. This is called protected mode, and is used by Internet Explorer 7 on Windows Vista (IE7 on XP will not do this since it relies on Vista specific technologies). Using protected mode, IE7 doesn't even have the same unelevated privileges as you, it has even less. So now the exploit code can't even mess with your user account, let alone your system.
That is where the value of UAC lies, and where I believe it will make a real difference. Users will still be users, and they'll still happily elevate anything to see dancing bunnies, but at least they'll be protected against exploits in applications that are not elevated.