I am these days creating setups of add-ins for Visual Studio using MSI and today when executing a setup intended for the current user (not for all users), not requiring admin rights, on Windows 2008 Server with a standard user account I have got the following error:

“The system administrator has set policies to prevent this installation”

I was not familiar with Windows Server and those policies but I needed a clean machine to test several setups and it happens that I had a clean virtual machine with Windows Server, SharePoint 2007 and Visual Studio 2010 so I used that. After searching the web I have learned that this problem is caused by the value DisableMSI (or lack of it) in the registry entry:

HKEY_LOCAL_MACHINE\Software\Policies\Microsoft\Windows\Installer

See:

DisableMSI (Windows)
http://msdn.microsoft.com/en-us/library/aa368304.aspx

Creating that registry entry and name and setting its value to 0 solves the problem and a standard user can install a MSI setup that doesn’t require administrator privileges on Windows Server. Client Windows have a different behavior as explained in that article.