Active Directory is a very powerful and complex tool for large organizations. SBS 2003 protects the user from needing to be knowledgeable in configuring Active Directory and takes care of this for the user. However, this complex nature means that for the upgrade we need to adjust some of the configuration settings relating to the versions of Windows Server on the network. If you are not familiar with Active Directory, then I would simply follow the instructions.
Note
If you have a Windows Server 2000 system on the network as a domain controller, you will need to demote it using DCPROMO before you can continue here. Running DCPROMO will offer to demote the server it is run on for you.
As a little bit of background, Active Directory is built with the intention that it will increase in functionality and scope as newer versions of Windows Server are released. For SBS 2008 to function correctly, it requires that level to be at least that of Windows Server...