VNC FAQ-o-Matic : VNC Basics : Why doesn VNC work when the PC is locked?
In Windows (NT/2000/XP), you can “lock” the desktop which requires a user to enter a password before they can use it. In such situations, it’s common that the PC will accept VNC connections, but they won’t work: you supply a password, and the session immediately closes. To work around this, setup VNC to run as a “Service” on the PC. It’s one of the options you’ll see in the “Start -> Programs -> VNC” program group. Sometimes even if you have it running as a service, the connection will immediately close or you’ll get a “connection refused” message. To fix this, you may have to either stop and restart the VNC service, or uninstall and then reinstall VNC. Typically one of these two approaches will fix the problem. Thanks to John Aldrich (JAldrich-at-covista-dot-com) and Sean Echevarria (Sean-dot-contact-at-creepingfog-dot-com) for the info!