What are the practical effects of setting the FILE_ATTRIBUTE_SYSTEM flag on a Windows folder?

Question

I need to work with desktop.ini files and the official Microsoft documentation mentions that a folder needs to have the FILE_ATTRIBUTE_SYSTEM in order for Windows to parse said desktop.in files. But there's no documentation on what this attribute actually does. The documentation simply says

"A file or directory that the operating system uses a part of, or uses exclusively."

without further elaboration.

What are the consequences of making a non-system folder into a system folder? The official documentation is frustratingly silent on this.

Answer 1

There's no known effect on core OS. But applications, such as file managers may use it.

Windows Explorer would hide such folders (and files) if they also have hidden attribute unless "Hide protected operating system files (Recommended)" option is unchecked. By contrast, folders (and files) that are not system, only hidden, will be shown if "Show hidden files, folders, and drives" option checked.

Older file managers (from MS DOS era) produced way more warnings for system folders (and files), including extra warnings for deletion and renaming, but it seems no longer be the case. Some files that should reside in the specific area of disk used to be marked with this attribute. Apparently, the attribute was way more meaningful those days, and nowadays it is something legacy and not very useful.