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It means the "system32" folder inside whatever the system folder of the currently running version of Windows is. It may be, in fact probably is (at least 90% of the time), C:\Windows\system32, but the point of using the %SystemRoot% specification is that even if you've somehow managed to install Windows in some nonstandard location, that will point to the correct directory.

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Q: What does percent systemroot percent system32 mean?
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