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A FAQ in Internet Explorer 6 Newsgroup

Due to Local Machine Lockdown in XP SP2, when you view a Web page locally, scripts and ActiveX controls are blocked by default. If you are certain that you want to allow the Web page to run ActiveX controls or scripts, click Yes in the message box. By clicking Yes, you allow the active content to run on the Web page youre viewing, but only on that occasion.

Workaround (Extracted from SP2 Developer Implications page)

Rename the .HTM file to .HTA (Example.. Index.HTM to Index.HTA and test the file locally). HTA files have more privileges than the HTM files, can run active content on Local Machine by default.

-or-

Open the HTM file in Notepad or any other editor and add the line <!-- saved from url=(0023)http://www.contoso.com/ --> to it, where the (0023) value is the string length of your URL that follows it and Contoso is the name of your Web site. This runs the local HTM file in Internet Zone or whatever zone contoso.com is assigned to, thus allowing the active content to run

More Information - Local Machine Zone Lockdown - Developer Implications:
http://msdn.microsoft.com/security/prod ... evimp.aspx

To totally disable the Local Machine Zone restriction (to enable IE to run Active Content locally) (not recommended, though) for valid reasons, read below:

In Internet Explorer, on the Tools menu, click Internet Options. On the Advanced tab, scroll down to the Security section of the list. Select the Allow active content to run in files on My Computer check box, and then click OK. This option is a per-user setting and it's advisable to use this as a last resort.