The Windows equivalent of the
HOME directory is the
user-specific application data directory. The actual location
depends on your Windows version and system configuration; typical values
are C:\Documents and Settings\username\Application Data on
Windows 2K/XP and later, and either C:\WINDOWS\Application Data
or C:\WINDOWS\Profiles\username\Application Data on the
older Windows 9X/ME systems.
HOME can also be set in the system registry, for details see
The home directory is where your init file .emacs is stored. When Emacs starts, it first checks whether the environment variable HOME is set. If it is, it looks for the init file in the directory pointed by HOME. If HOME is not defined, Emacs checks for an existing .emacs file in C:\, the root directory of drive C:1. If there's no such file in C:\, Emacs next uses the Windows system calls to find out the exact location of your application data directory. If that system call fails, Emacs falls back to C:\.
Whatever the final place is, Emacs sets the value of the HOME environment variable to point to it, and it will use that location for other files and directories it normally creates in the user's home directory.
You can always find out where Emacs thinks is your home directory's location by typing C-x d ~/ <RET>. This should present the list of files in the home directory, and show its full name on the first line. Likewise, to visit your init file, type C-x C-f ~/.emacs <RET>.
Because MS-DOS does not allow file names with leading dots, and because older Windows systems made it hard to create files with such names, the Windows port of Emacs supports an alternative name _emacs as a fallback, if such a file exists in the home directory, whereas .emacs does not.
 The check in C:\ is for compatibility with older versions of Emacs, which didn't check the application data directory.