In most applications, users typically access Web applications anonymously — that is, they do not initially provide authentication credentials. In that case, the Web application has to assume (impersonate) some identity that it can use to request resources.
By default, when ASP.NET allows anonymous access, the application runs in the context of a special local (not domain) account. The user context depends on the operating system. In Windows 2000 and Windows XP, applications run under the account called ASPNET. In Windows Server 2003, the user context is called NETWORK SERVICE. These user accounts are created during the .NET Framework installation process with a unique, strong password, and are granted only limited permissions. The ASPNET or NETWORK SERVICE user can access only specific folders that are required to run a Web application, such as the \bin directory in which a Web application stores compiled files.
Full information on the topic can be found in MSDN: Security Considerations for ASP.NET Web Applications
Instructions on how to give process permissions on a folder - FAT32 file system
No need to give any permissions on the folder.
Instructions on how to give process permissions on a folder - NTFS file system
Internet Information Services v5.x - name of account: ASPNET user
- Right-click on the RadPanelBar (or Telerik_RadControls) folder and select Properties.
- Click on the Security tab. If you do not see the security tab, click
here
The Security tab is not visible because you have
Simple File Sharing enabled. You will need to disable it before you continue. To do so:
- Open a Windows Explorer.
- On the Tools menu, click Folder Options, and then click the View tab.
- In the Advanced Settings section, clear the Use simple file sharing (Recommended) check box (at the bottom of the list).
- Click OK.
- Right-click on the folder you need to add ASPNET permissions to and select Properties. Click on the Security tab.
- Click on Add (to add a new user).
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Click on Locations to select your local machine. Your screen should look similar to the following:

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Select your local machine and click OK.
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Type ASPNET in the textbox and click on Check Names. ASPNET should underline (if it doesn't then you don't have Microsoft's .NET framework installed).

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Click OK.
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Select the LOCAL MACHINE NAME/ASPNET user you just created (it should be named ASP.NET Machine Account (NAME/ASPNET)) and check the Full Control box to give it full permissions.
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Click APPLY.
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Click Advanced and make sure that the "Inherit from parent ..." check box is checked.
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Click OK to close the Advanced properties.
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Click OK to close the folder properties.
Internet Information Services v6.x - name of account: Network Service user
Same as above but replace ASPNET with Network Service.