Before getting into how variables are configured, it’s important to have some understanding of the elements that variables control. One great example is when using the Run command. You may have noticed that you can use the Run command by typing cmd and pressing OK, without specifying the EXE extension. The command prompt will open in the case for two reasons. First, EXE is one of the extensions automatically attempted when one is not provided, and the extensions used are defined by an environment variable.
The second reason that the command prompt will open is that an environment variable is also defined that outlines in which directory paths XP should search for the specified file. For example, the file notepad.exe is found in the WINDOWS\system32 folder, and this is one of the paths defined in an environment variable. If you were to create a new folder called C:\notepad and move the notepad.exe file to that location, XP would no longer be able to find this program from the Run command, unless you explicitly specified the path. With a little tweaking and tuning of environment variable settings, you can easily change the default behavior of XP to your preferences.