The first versions of Microsoft Windows ran every program in a single address space. Every program was meant to co-operate by yielding the CPU to other programs so that the graphical user interface (GUI) could multitask and be maximally responsive. All operating system level operations were provided by the underlying operating system: MS-DOS. All higher level services were provided by Windows Libraries Dynamic Link Libraries. The Drawing API, GDI, was implemented in a DLL called GDI.EXE, the user interface in USER.EXE. These extra layers on top of DOS had to be shared across all running Windows programs, not just to enable Windows to work in a machine with less than a megabyte of RAM, but to enable the programs to co-operate among each other. The Graphics Device Interface code in GDI needed to translate drawing commands to operations on specific devices. On the display, it had to manipulate pixels in the frame buffer. When drawing to a printer, the API calls had to be transformed into requests to a printer. Although it could have been possible to provide hard-coded support for a limited set of devices (like the Color Graphics Adapter display, the HP LaserJet Printer Command Language), Microsoft chose a different approach. GDI would work by loading different pieces of code, called 'device drivers', to work with different output devices.
The same architectural concept that allowed GDI to load different device drivers is that which allowed the Windows shell to load different windows programs, and for these programs to invoke API calls from the shared USER and GDI libraries. That concept was dynamic linking.
In a conventional non-shared, static library, sections of code are simply added to the calling program when its executable is built at the linking phase; if two programs call the same routine, the routine is included in both the programs during the linking stage of the two. With dynamic linking, shared code is placed into a single, separate file. The programs that call this file are connected to it at run time, with the operating system (or, in the case of early versions of Windows, the OS-extension), performing the binding.
For those early versions of Windows (1.0 to 3.11), the DLLs were the foundation for the entire GUI.
* Display drivers were merely DLLs with a .DRV extension that provided custom implementations of the same drawing API through a unified device driver interface (DDI).
* The Drawing (GDI) and GUI (USER) APIs were merely the function calls exported by the GDI and USER, system DLLs with .EXE extension.
This notion of building up the operating system from a collection of dynamically loaded libraries is a core concept of Windows that persists even today. DLLs provide the standard benefits of shared libraries, such as modularity. Modularity allows changes to be made to code and data in a single self-contained DLL shared by several applications without any change to the applications themselves.
Another benefit of the modularity is the use of generic interfaces for plug-ins. A single interface may be developed which allows old as well as new modules to be integrated seamlessly at run-time into pre-existing applications, without any modification to the application itself. This concept of dynamic extensibility is taken to the extreme with the Component Object Model, the underpinnings of ActiveX.
In Windows 1.x, 2.x and 3.x, all windows applications shared the same address space, as well as the same memory. A DLL was only loaded once into this address space; from then on all programs using the library accessed it. The library's data was shared across all the programs. This could be used as an indirect form of Inter-process communication, or it could accidentally corrupt the different programs. With Windows 95 and successors every process runs in its own address space. While the DLL code may be shared, the data is private except where shared data is explicitly requested by the library. That said, large swathes of Windows 95, Windows 98 and Windows Me were built from 16-bit libraries, a feature which limited the performance of the Pentium Pro microprocessor when launched, and ultimately limited the stability and scalability of the DOS-based versions of Windows.
While DLLs are the core of the Windows architecture, they have several drawbacks, collectively called "DLL hell". Currently, Microsoft promotes .NET Framework as one solution to the problems of DLL hell, although they now promote virtualization-based solutions such as Microsoft Virtual PC and Microsoft Application Virtualization, because they offer superior isolation between applications. An alternative mitigating solution to DLL hell has been implementing side-by-side assembly.