Active directory Vs local accounts

hi,

i am setting up a server ( windows 2000).. not sure if this is the correct forum... buy let's take a shot.
i have never set one up before, and it has been tossed away by my techs...
i have a 4 peer to peer workstations...
i am looking ot let term serve users log in, and also use it for file storage.
there is also one program, which is an insurance data base information management system which we will be running on it.

first aquestion.. what is local users VS active directory... i have been toild i could set it uop either way...
For not know anybeeter... i used local users...

now what about term server users.. ( i understand port fowarding on my router.. )   how do they get to use it?
is there a difference between and administrator term served in... VS   an admionistrator logged on to the actual terminal of the hard waired work stateion?

a little discussion appreciated..

Intelogent