Specifies an intranet server to host updates from the Microsoft Update Web sites. You can then use this update service to ...

"Specifies an intranet server to host updates from the Microsoft Update Web sites. You can then use this update service to automatically update computers on your network. 

This setting lets you specify a server on your network to function as an internal update service. The Automatic Updates client will search this service for updates that apply to the computers on your network. 

To use this setting, you must set two servername values: the server from which the Automatic Updates client detects and downloads updates, and the server to which updated workstations upload statistics. You can set both values to be the same server. 

If the status is set to Enabled, the Automatic Updates client connects to the specified intranet Microsoft update service, instead of Windows Update, to search for and download updates. Enabling this setting means that end users in your organization don't have to go through a firewall to get updates, and it gives you the opportunity to test updates before deploying them. 

If the status is set to Disabled or Not Configured, and if Automatic Updates is not disabled by policy or user preference, the Automatic Updates client connects directly to the Windows Update site on the Internet. 

Note: If the "Configure Automatic Updates" policy is disabled, then this policy has no effect."