Policy Based Management gives us centralized management of our SQL Servers. It allows us to evaluate, configure, and enforce standards across the enterprise. If you are familiar with Active Directory Group Policy Objects then you will see a direct resemblance between the two technologies. PBM allows us to create rules for our SQL Servers so that we can ensure a consistent configuration across our enterprise. You can use it to evaluate these rules and change any settings that do not conform. In some instances you can even prevent users from making changes that do not conform to your rules.
PBM is only supported on SQL 2008 or above. It is supported on any edition except Express, Web, and Compact. It is a common misconception that PBM is supported in Express Edition. In Express Edition you will see Policy Management under the Management node in SSMS, but if you attempt to enable it, you will receive an error that it is not supported on that edition.
Even though PBM is only supported in SQL 2008 and above, that is only for the management server itself that houses your policies. However, you can use that PBM instance to evaluate both SQL 2000 and 2005 servers. PBM stores all of its policies and configuration in the MSDB system database, so make sure you back up that database regularly.