Policy Based Management in SQL Server 2008 allows administrators to define standard configuration policies and enforce compliance across multiple database instances. Key components of PBM include facets, conditions, policies, targets, and categories. Facets define object types or configuration options that can be controlled. Conditions specify allowed values for facet properties. Policies enforce conditions and can be scheduled, prevent changes, or log violations. Categories group related policies and a mandate setting enforces compliance when an instance subscribes to a category.