If you upgraded from another OS such as XP, windows.old normally refers to the old operating system files.
Should you ever want to return to that Operating System, that folder will help the installation return the machine to how it was before the upgrade.
If not, you can just delete the folder and be done with it.
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Phil AKA Vacunita
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Ignorance is not necessarily Bliss, case in point:
Unknown has caused an Unknown Error on Unknown and must be shutdown to prevent damage to Unknown.