Believe it or not, your computer doesn't or won't.
Remember the days of DOS? Every time you booted your computer it would ask for the time and date. Soon (mid-80s with the PC-AT) most computers included a clock that ran off a battery and automatically gave the "correct" time to the operating system. In my experience, these clocks could be inaccurate by minutes a day and you had to go into the BIOS setup or use a special utility to reset it.
Since at least Windows 95 computer operating systems had an integrated clock display. When you adjusted this clock, it corrected the system clock accordingly. They would also keep up with your current time zone and adjust for daylight saving time, including knowing that parts of Indiana didn't honor DST. Windows XP added a capability to automatically synchronize with a standard time signal over the internet.
In August 2005, the Congress passed the Energy Policy Act which changed the effective dates of Daylight Saving Time. In 2007 we "spring forward" on March 11 instead of the previously defined April 1 (DST ends November 4, 2007 instead of October 28). Unfortunately the dates to automatically adjust the computer clock are deep inside Windows.
As of the end of January, Microsoft has a patch to correct the change in DST effective dates - but it only works for Windows XP SP2. Worse, this patch is not even a critical download. That means your Windows Automatic Updates won't find it unless you look for optional updates. Microsoft says they will make it a critical download before March 11 - as long as you're faithful about getting your patches promptly.
If you're running SP1 or Windows 2000, you can make an adjustment to the registry - if you really want to risk that. If you've got Win9x, Microsoft says "tough". Oh, don't forget that your camera, PDA, security system, and other devices attached to your computer may be wrong also.
Why do we care? You find the most recent copy of a file within a couple weeks, not seconds. Maybe it's not significant to you if the timestamp on your pictures is minutes, or even an hour or more, off. We're used to emails having wildly weird "sent time". But what about your appointments in Outlook? I've had programs refuse to open a file that was last modified in the future. What if your company's timeclock or door locks are synchronized off a PC that has the wrong time? And it gets even worse in an intensively networked environment.
Microsoft especially warns that Outlook appointments may show random variances during the DST ambiguity period. Some appointments may be stored with GMT and adjust by your time zone settings while others may be explicitly saved as "11:00". These will be affected differently even after you apply the patch. The problems will be particularly bad for recurring appointments and those that were synchronized from another person's meeting request.
What should an individual user do? Be very suspect of your computer time and appointments for 4 weeks of 2007. Maybe you should print your schedule for March 11 - April 1 before the changeover and compare it to what Outlook shows after that. And, of course, always apply your Windows Updates promptly.
For the most recent information from Microsoft, keep an eye on http://www.microsoft.com/windows/timezone/dst2007.mspx and other links from the below. Unfortunately most of the Microsoft documentation is tough reading. It is directed at very high-end corporate administrators and refers to situations you and I will never deal with; although we may suffer their effects.
Links for this topic:
Microsoft's up-to-date general information:
http://www.microsoft.com/windows/timezone/dst2007.mspx
The time zone updater:
http://support.microsoft.com/kb/924840/en-us
Configuring your time zone settings:
http://support.microsoft.com/kb/914387/en-us
Fixing your exchange server:
http://www.microsoft.com/downloads/details.aspx?FamilyID=c16aea4a-ed33-4cd9-a7c3-8b5df5471b7a&DisplayLang=en
Time zones and PCs:
http://en.wikipedia.org/wiki/Daylight_saving_time
http://www.seeklyrics.com/lyrics/Chicago/Does-Anybody-Really-Know-What-Time-It-Is.html
Chicago -
Does Anybody Really Know What Time It Is?