Windows XP forum: Default User's Profile vs. All Users Profile

Windows NT-based computers follow the following discovery process for
creating a new profile either for Admin or regular user:

Is there a central (roaming) profile defined in User Manager for Domains
(ADUC)?
If yes, does the profile exist? If yes, use profile.
If no, does this user have a local profile? If yes, use local.
If no, does Default User exist on Netlogon share of validating Domain
Controller? If yes, use it.
If no, does Default User exist in WinNT\Profiles (%systemdrive%\Documents
and Settings)?

If yes, Windows loads the Default User profile and applies it to the user's
desktop environment. When the user logs off, the local profile is actually
created on the computer for the user (profile file structure is created and
used at logon time). The next time the user logs on, the local profile is
used, if it wasn't deleted, instead of the local default profile.

All Users profile creates a common environment and applies (merges) to every
user at every logon.

In short, All Users is used by All Users..
Default User is used whenever a new account is created.

Items in the "All Users" folder are NOT inherited - they are barely visible to everyone. In other words, new or existing users do NOT get their own copy of shortcuts from "All Users" - they simply SEE them. If they modify them (assuming that they have the authority to do so) then their modification will be visible to every other user too.

EXPLAINING the computer's logic for profile discovery.

That is why, as I indicated, BOTH the Default User account and the All Users account are necessary accounts.

When the local user profile is created at the user's initial logon the Default User account is used for that logon and once the new user has logged on his account is populated with the All Users default settings (Language, connections, shares, applications available to all users etc.) and ready to be customized by the user for the user.