A: Many organizations use a Key Management Server (KMS), which is a specific host that's configured with a special key that activates the host with Microsoft. This then allows that host to activate machines on a company's network without having to make each machine contact Microsoft for activation.
After machines are activated by the KMS server, they remain activated for 180 days. Then they must reactivate again every 180 days (although machines actually reactivate before they reach the 180 days), which ensures the machine isn't connected to the corporate network once and then never connects again.
Active Directory Based Activation (ADBA) is an optional replacement for KMS for the Windows 8 and Windows Server 2012 installations introduced in Windows Server 2012 Active Directory (AD). It allows machines to activate just by being part of the domain. Once again the activation is for 180 days, but provided the machine stays joined to the domain, and can communicate with a domain controller (DC), reactivation is automatic.
To use ADBA, AD must have been updated with the Windows Server 2012 schema (using the adprep from the Windows Server 2012 media). You're not required to use an actual Windows Server 2012 DC.
To configure, install the Volume Activation Tools, which are part of the Remote Server Administrative Tools (RSAT), then launch the Volume Activation Tool. Select the type of activation you wish to use (ADBA), as the screen shot show, then click Next.
Select Volume Activation Method Screen
Type in your organization's KMS key (the same key is used for KMS and ADBA), and a friendly name can be given to make it easier to manage if you have multiple keys in the future. Then click Next, and you're finished.
Manage Activation Objects Screen
There is no configuration to perform on the Windows 8 or Windows Server 2012. The OSs just need to be configured to use the generic volume license key that's used to tell the OS to use KMS/ADBA and is the same for all organizations. The machines will then get the information from AD and activate.
There is no ADBA server or even an ADBA service running on DCs. It's an entirely passive process, where the activation component on the Windows 8 or Server 2012 client polls AD and finds the activation seed object to automatically activate the client.
Note, you will still need KMS for older clients such as Windows 7, Windows Server 2008 R2, and earlier.
