If you do not want any access to resources outside your subnet, you may elect to use a different protocol. It does have the advantage of being the fastest protocol for small workgroup networking. Because of this, every machine must have a local account for every user that will use the machine. This model is very quick to set up and everyone can maintain their own machine. The drawbacks are that whenever a change needs to be made to an account, it must be performed on every machine that account uses and that whenever a machine is added, all accounts that need to use that machine must be created again on that machine.
Domain is for larger groups.
In a domain, special servers, called Domain Controllers or DCs, hold the authentication database and verify permissions when resources are accessed. This model is easier to manage since a change has to be made just once to a domain to have effect everywhere. DCs can also be arranged geographically to minimize the number of network hops an authentication request must make. This can improve network performance in larger implementations. Contact the Windows 2000 Infrastructure group to have your server participate in a domain.