Native and Mixed Mode for Windows Servers

Mixed mode vs native modes for Windows 2000

Mixed mode if you have Windows NT 4.0 domain controllers in your Windows 2000 domain.

Native mode handles groups better, still talks to Windows NT 4.0 member servers and Exchange 2003 required native mode.

Here is how to covert your Domain to native mode
WARNING! Once this is done it can not be reversed.

Control Panel
Administrative Tools
Active Directory Users and Computers
Right-click the domain and choose Properties
General tab,
Click Change Mode.
Click Yes, Click OK!

For more info, check out tech net article:
Understanding Mixed and Native Modes

It takes 15 minutes to replacate through the domain.