Question:
Is alt.discuss (and previously "w") on Usenet or on WebTV's private server?

We (the users) have been under the impression that we _were_ usenet, just firewalled.

Answer:
Every Usenet article a WebTV subscriber reads is on WebTV's servers. (Well, as long as they are going through Discuss, not through DejaNews or other WWW Usenet servers). The way Usenet works is called a "flooding" algorithm. When a user (anywhere on Usenet) creates an article, it is stored initially on the that user's local server.

Each server has what are called "newsfeeds", which are sites with which it exchanges Usenet articles. The article a local user creates is transmitted to all of his site's newsfeeds who in turn send it to all of their newsfeeds and so on, until every Usenet server in the world has a copy of the article (see why it's called a "flooding" algorithm?). Because not every site wants all of the newsgroups, each newsfeed can be tuned so that that newsfeed exchanges only the newsgroups that each site wants.

WebTV restricts the alt.discuss newsgroups to our servers simply by not exchanging them with any of our newsfeeds. Simple, huh?

Well, almost. Each site has to know which newsgroups exist *to* feed. Newsgroups are created by sending special articles called control messages. A "newgroup" control message requests that a site create a newsgroup, a "rmgroup" control message requests that a newsgroup be deleted, and a "cancel" control message requests that a specific news article be deleted (from every server in the world that received it!) Since we never issue Usenet newgroup control messages for the alt.discuss groups, most other sites have no idea that they exist.