I believe you're thinking of BITS (Background Intelligent Transfer Service). It's enabled by default and Windows Update depends on it if you're configured to automatically download and install updates on a schedule. Some users report improved local file transfer performance with BITS disabled, so you can certainly test that, but if you're experiencing poor file copy performance over your LAN try this first: run
LAN Speed Test (Lite) v1.3 so you have an actual baseline on drive file transfer performance to compare with, after making any changes to Windows settings. LAN Speed Test is a simple tool that tests what really matters and that's how fast data actually gets transfered from point A to B on your local drives or LAN in real time. Now go to Control Panel > Programs and Features > click "Turn Windows features on or off" > uncheck "Remote Differential Compression" > click OK (this setting needs to be changed on each PC on your LAN). Reboot, then run LAN Speed Test again to compare results to your baseline figures.
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