Microsoft Knowledge Base Article 317517 contains the following summary:

This article describes how to use the Program Compatibility Wizard with computers that run Windows Server 2003. The Program Compatibility Wizard prompts you to test your program in different modes (environments) and with various settings.

For example, if the program is designed to run on Microsoft Windows NT, set the compatibility mode to Windows NT, and then try to run your program again. If this is successful, the program will start in that mode each time.

The wizard also allows you to try different settings, such as switching the display to 256 colors and the screen resolution to 640 by 480 pixels.

Most programs run properly on computers that run a member of Windows Server 2003. The exceptions are some earlier games and other programs that were written specifically for an earlier version of Windows.

If you experience problems with a program that worked correctly on an earlier version of Windows, use the Program Compatibility Wizard to help you select and test compatibility settings that may correct those problems. Many of the most common issues that prohibit earlier versions of programs from working correctly are resolved. If you run a program and it does not function as expected, run the program in one of the compatibility environments.

WARNING : Be careful when you use Compatibility Mode to bypass version warnings in Setup and installation programs. Some programs are designed for a specific operating system and intentionally prohibit the use of later versions. These are most often system tools (such as antivirus, firewall, CD burning, disk management, and backup software) that run at a very low kernel mode and have the potential to cause serious problems if they are installed.