What is the difference between a workgroup and a domain?
A domain is a collection of servers and clients that are managed by a central security system. In Windows 2000, this central security system is known as Active Directory. The domain controllers in the network maintain Active Directory. Active Directory controls what computers can communicate within the domain and which users can access shared resources. A workstation does not have a central control, every system is a peer and no security information is shared or enforced outside of each individual box.
For more info on workgroups and domains, see How can I switch between a workgroup and a domain? or Workgroups and domains.