What does the percent mean in something like %Homepath% or %Homedrive%? And are the words in the middle case sensitive?
The percent signs indicate that they are environment variables that are to be expanded. You can see these in action by starting up a Command Prompt (CMD.EXE). Type the SET command and you'll see all the currently defined environment variables for your account.
On the machine I am using right now, HOMEDRIVE and HOMEPATH are the following according to the SET command:
HOMEPATH=Documents and Settingsjohn
To show it using the expanded environment variables, enter the following command in the Command Prompt window:
This is the equivalent of typing on my machine:
dir "e:Documents and Settingsjohn"
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