If you are testing Project Server 2010 by upgrading your Project Server 2007 databases in a test environment, then you may notice that the new 2010 feature of manual scheduling is not available. I worked with a customer today who had performed an upgrade in his test environment and noticed that the great new feature he had heard about for manual scheduling just wasn’t available. This is caused by Backward Compatibility Mode being on as a result of the upgrade.
So, what’s the point of Backward Compatibility Mode? Well, after you upgrade to Project Server 2010 (either by the in-place or database-attach upgrade method), BCM allows you to avoid having to upgrade your Project Professional 2007 client computers at the same time. This means you can upgrade to Project Pro 2010 on a schedule that suits your budget without having to take a single larger hit at one time. Once everyone is upgraded to Project Pro 2010, you can turn off BCM and enjoy all the new features that are available and, to be honest, really cool.
Keep in mind, however, that once BCM is disabled it cannot be re-enabled. Verify that you want to disable BCM if you are going to make the change.
This article describes Backward Compatibility Mode and its effects and also how to turn it off.