Windows supports the following levels of challenge/response authentication for network logons:
- LM
- NTLM version 1 (NTLMv1)
- NTLMv1 with NTLMv2 session security
- NTLMv2
The LM variant protocol allows for interoperability with earlier versions of Windows, such as Microsoft Windows 95 and Microsoft Windows 98. However, the passwords that are used in LM authentication are case-insensitive and are divided into seven-character chunks. These restrictions make it easier for someone to recover your password.
NTLMv1 authentication contains improvements that allow for passwords that are case-sensitive and that are not divided.
NTLMv2 authentication expands the key space to 128-bits. Additionally, NTLMv2 authentication uses different keys for client to server communication and for server to client communication. This behavior improves the signing and sealing of messages. NTLMv2 is the recommended level of challenge/response authentication.