Create Password Reset Disks
The Forgotten Password Wizard allows you to create a password reset disk that can be used to recover user account and personalized computer settings if the password is forgotten. The steps to perform this task differ for domain and workgroup scenarios.
Domain Password Reset Disk
Press CTRL+ALT+DELETE to open the Windows Security dialog box
Click Change Password.

Click Backup to open the Forgotten Password Wizard.

Click Next and then follow the instructions as they appear on the screen.
Non-Domain Password Reset Disks
The procedure for creating non-domain reset disks varies depending on whether you have an administrator account or a limited account.
Administrator Password Reset Disk
[Start] [Control Panel] [User Accounts]

Select the account name.

Click [Prevent A Forgotten Password] under Related Tasks on left of screen.
Follow the instructions in Forgotten Password Wizard.
Limited Account Password Reset Disk
[Start] [Control Panel] [User Accounts]
Click [Prevent A Forgotten Password] under Realted Tasks on left of screen
Follow the instructions in Forgotten Password Wizard.
Using the Password Reset Disk to Log On to A Computer
Click the user name whose password is on the recovery disk
Press [Enter] or the [Right Arrow] button.

This causes the [Did You Forget Your Password] message shown below to appear.
Did you forget your password?
You can click the "?" button to see your password hint.

Or you can use your password reset disk.


Please type your password again.
Be sure to use the correct uppercase and lowercase letters
Click [Use Your Password Reset Disk].

This will start the Password Reset Wizard.

The password reset disk is automatically updated with the new password information. You do not have to create a new password reset disk
The password reset disk that you create can only be used with the computer on which it was created.

- srikanth dhanwada