Last known good (LKG) is a useful mechanism for getting a system that crashes during the boot process back to a bootable state. Because the system’s configuration settings are stored in HKLM\SYSTEM\CurrentControlSet\Control and driver and service configuration is stored in HKLM\SYSTEM\CurrentControlSet\Services, changes to these parts of the registry can render a system unbootable. For example, if you install a device driver that has a bug that crashes the system during the boot, you can press the F8 key during the boot and select last known good from the resulting menu. The system marks the control set that it was using to boot the system as failed by setting the Failed value of HKLM\SYSTEM\Select and then changes HKLM\SYSTEM\Select\Current to the value stored in HKLM\SYSTEM\Select\LastKnownGood. It also updates the symbolic link HKLM\SYSTEM\CurrentControlSet to point at the LastKnownGood control set. Because the new driver’s key is not present in the Services subkey of the LastKnownGood control set, the system will boot successfully.
Source of Information : Microsoft Press Windows Internals 5th Edition