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Essentially, these playback modes change how SilkTest uses the Windows API hooks, a hook is a mechanism by which a function can intercept events (messages, mouse actions, keystrokes) before they reach an application. SilkTest uses the Windows journal hooks to help it record and playback actions. With journal hooks the system input queues are attached though the thread that installed the hook. This means that all system input must pass through this one point of execution.
Setting Win32 playback mode in SilkTest changes the way the actions are queued, they are no longer attached through the one thread and the one point of execution. The events are queued through multiple threads. This is a more low-level approach and can help when there are playback issues with functions involving the mouse and keyboard (Click(), TypeKeys(), PressMouse(), etc).
The main drawback to be aware of when using Win32 playback mode is slight performance degradation resulting in tests taking longer to execute. This isn"t really noticeable unless you are running a long test and you have Win32 mode set for the duration.