Microsoft Knowledge Base Article 814598 contains the following summary:
This step-by-step article describes how to create System Policy settings for down-level client computers in a Windows Server 2003 domain. In a Windows Server 2003 network, you can use Group Policy settings to configure and control Windows Server 2003-based computers, Windows 2000-based computers, and Microsoft Windows XP Professional-based computers. However, to configure Microsoft Windows NT 4.0-based client computers, Microsoft Windows Millennium Edition-based client computers, and Microsoft Windows 98-based client computers, you must use System Policy settings. System Policy settings are different from Windows Server 2003 Group Policy settings in that they overwrite registry settings on the client computer with persistent changes. This behavior is known as "tattooing."