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Among the features of Palladium:
It uniquely identifies both you and your PC to those you deal with. Any connection between you and any other device is mediated by the system, which can prevent transmission of content or your access to that content.
Documents you receive cannot be modified (or in some cases, retransmitted) without the originator's permission. This means any attempt to summarize content, or even mark it up, may be restricted.
Email will be mediated by the system. Only content authorized by you (or your employer? or your government?) can pass through the system.
"The Man" will be on your system. Or at least "My Man." Content originators can send an agent accompanying their content to ensure that content is not waylaid between them and their intended recipient. This is marketed as insurance that hackers and identity thieves can't capture, alter or audit messages transmitted between you and your recipient. How this represents an improvement over current encryption systems or secure channels such as virtual private networks is not clear. It is also not clear whose "man" this will be. Microsoft has hinted that the "man" might be fitted with a back door for nervous government and police types.
Even without a back door, Palladium may allow third parties to monitor your activity. Although the system is still in early stages of development, it appears to extend a concept developed for Microsoft's Directory Services products. Products like Active Directory generate a "unique object identifier" for every document and code element in the enterprise. Based on that identifier, object flow can be tracked and user access restricted. Who holds the identifier (besides your company or ISP)? Well, Microsoft does it today, along with a limited number of corporate partners.