This is a nice writeup on how Windows Vista and Windows 7 know whether you have an active Internet connection and whether you need to visit a page in your web browser to activate it. It also talks about the privacy implications, and how to set up the service to use your server, rather than Microsoft’s.
I’m not worried about the privacy implications, as what Microsoft is storing is the same as what any other web site stores in its server logs. Or much less, in many cases, since there are no cookies involved or anything. They won’t be able to use the information to figure out whether I’m staying at a Hilton or a HoJo Motor Lodge. The newspapers I read know more about me than anyone could figure out from this.
To me, the convenience is worthwhile. How often have I connected my XP machines to a network and not been able to get anywhere because I hadn’t visited the logon/terms of service page? It’s kind of nice that the operating system does a little bit of investigation for me.
The writeup also tells how to disable the service, not that I think it will make a noticeable difference in performance. If your system can run Vista or 7, it has enough horsepower to spend on this, which amounts to retrieving a plain text file with two short words in it.