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How does the active diretory user attribute 'Log on to' work?

I have a service account that has access only to the two application servers it runs jobs on; however it needs to connect to a domain controller to read active directory for user accounts.  Does it need to be granted the user right for 'log on to' in AD?  How does this permission really work?  
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Krzysztof Pytko
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Just install on his workstation

if XP -> administrative tools
if 7 -> RSAT

and he will use dsa.msc console to see AD Users and Computers without need to log on to the DC

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Hmm, thats not really what I was looking for.  This is for business objects application that will be used to read out of AD and populate the information in business objects.  We will be authenticating users through this as well.  It needs to go through AD.  I'm not sure exactly what locking down the 'log on to' feature prevents from happening which is what I am trying to find out.  I don't know if it is talking about interactive logons or if it would block the ldap call to the DC as well.
It blocks interactive logon. You can still query AD using LDAP syntax. Allowing users direct access to the DC is bad practice. If you can avoid that, do not allow them log on locally to the DCs.

I think that this application would query LDAP for atributes. In case that it needs to write any of them, please make sure that users working with that app, will have delegated apropriate rights to those objects.

They only need read acces to AD, no writes.  They do not need the ability to log on to the DC, only to query for objects/attributes.  Not sure why this isn't working.
Do you see any error message or error in event log ?
The Log On To: is a method to restrict users from logging into, interactively, all computers in the domain.  By identifying specific computernames, typically workstations, in the LOG ON TO section, the user will ONLY be allowed to log on to those machines.

So, example, if JaneDoe user is only supposed to be allowed to log on to a single workstation in your company, you'd add the desired workstation to the Log On To list.
NO, that is the strange part, I don't see any errors anywhere.
What happens if your run grant that user local administrator rights and run this app?
Not able to grant local admin rights to this app.  This is a secured environment.  It doesn't need to have any admin rights.  I just checked AD and it has rights to read all attributes and permissions.  All attirbute lookups are default which is correct and distinguised name is correct.  I have no idea what else could be going on.
OK, secured environment? Firewall issues?

How does the service account "connect to a domain controller to read active directory for user accounts"?  Via what kind of LDAP/AD api?  If the account looks normal in AD, then you might want to troubleshoot the access venue.  The different ways AD gets exposed by have different subtle issues.
I'm not sure honestly what API it is using.  I believe Business Objects is Java based; however I did figure out the problem and it was that the attribute 'logon to' didn't specify the domain controller.  Once I added it there, it worked just fine.  I didn't think that it would work that way and slightly confused about why it does, but at least it is working now.  I just wish I could find some documentation about exactly how that attribute works.  Most of the documents on technet and the books I have basically just say that it controlls which systems you can access which is not a particuarly helpful description as it states the obvious and doesn't really describe how it works.  I appreciate all of the help.
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