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Windows Live ID's can be linked with Windows 8 to synchronise some of your content, files, favourites and bookmarks across computers to ensure that you always get a seamless experience, regardless of whether you are using a friend's PC or tablet. You can literally jump from one machine to another, as though it is the same machine, by keeping some of your basic information and settings stored in the cloud.
Your Windows Live ID is the one you use on Xbox Live, Messenger or Hotmail -- or any other email address and password combination you may have connected to Microsoft's services. This does not even have to be a @msn, @hotmail or @live account. It can even be your corporate or college/university email address and password.
Windows setup wants you to be as safe as you can, so it will ask you an additional security question to make sure that your account is safer than before. If you forget your password or find that your account has been accessed without your authorisation, you can reset it again from a Windows 8 machine or through Microsoft's online services.