Prior to Version 4, Silverlight apps ran in partial trust, which meant that all apps had to run in a security sandbox. Sandboxed apps have limited access to the local computer have other restrictions that helps prevent malicious behavior.
However partial trust restricts the usefulness of business applications which will need to access local files or operation in full screen mode. Silverlight 4 allows out-of-browser apps to be configured with Elevated Trust. To do this the designer sets the appropriate value in the app manifest, an existing app can be upgraded to Elevated Trust by having the manifest can be updated.
When a user installs an elevated trust out-of-browser application the default dialog box is replaced by a security warning which highlights that the app can access user data and so should only be installed only from a trusted sources.