Microsoft released Active Directory in Windows 2000 server, and it became a standard for enterprise identity management. Active Directory lives on-premises in servers called Domain Controllers (DC). Active Directory lives on-premise in servers called Domain Controllers (DC). Windows Active Directory or commonly referenced as Active Directory (AD) is Microsoft’s predecessor to Azure Active Directory,
Azure Active Directory (Azure AD or AAD) is Microsoft’s enterprise cloud-based identity and access management (IAM) solution. AAD is a core service of the Microsoft cloud platform and specifically the Microsoft 365 and Office 365 platforms.
Azure Active Directory (Azure AD) is a cloud-based identity and access management service which helps staff access external resources, cloud and SaaS applications as well as internal resources. Using Azure AD Connect to sync data between the on-premise DCs and the cloud, to enable hybrid deployments for organizations.
Azure Active Directory comes in four editions—Free, Office 365 apps, Premium P1, and Premium P2. (added 8/12/2020: for more information, see my blog post on this here )