JSI Tip 1195. A feature of Password Uniqueness.

In User Manager for Domains, you can set the Account Policy (Policies / Account) to Remember n Passwords.

Windows NT stores 2 images of your password. The case sensitive password and a case insensitive password for use on down-level clients that do do support case sensitivity (WFW, W95, DOS).

When you implement Password Uniqueness and change your password, Windows NT uses the case insensitive password to check for uniqueness. Thus, if your password was PassWord and you change it to PASSWORD, it won't pass the uniqueness test, even if you never used PASSWORD before.