Beginning with Windows Server 2008 and Windows Vista, this policy no longer has any effect. An administrator can perform an installation from the console session of a terminal server. An administrator can also perform an installation from a client session of the terminal server.
For more information, see Terminal Services in the Microsoft Windows Software Development Kit (SDK).
Operating systems earlier than Windows Server 2008 and Windows Vista:
Setting this per-machine system policy enables administrators to perform installations from a client session of the terminal server. If this policy is not set, administrators can only perform installations from the console session. Nonadministrative users can never perform installations from a client session. The default value for this policy allows only administrators to perform installations from the console session. Administrators can always do Administrative installations from a client session of the terminal server, or from the console session, regardless of whether this policy is set.
For more information see also, Using Windows Installer with a Terminal Server.