“Active Directory Domain Functional Level Check” Warning generated by the SCCM 2012 Prerequisite Checker

“Active Directory Domain Functional Level Check” Warning generated by the SCCM 2012 Prerequisite Checker

When I run the ConfigMgr 2012 Prerequisite Checker it’s failing on the Active Directory Domain Functional Level Check prerequisite with the following text:
The domain functional level is not configured for Windows Server 2003 or later. The domain functional level must be Windows Server 2003 or later if you will configure discovery to filter and remove stale computer records. Stale records are filtered by using the last logon timestamp for a computer. When you remove stale records, you can improve the performance of discovery. For more information about Active Directory domain functional levels, see http://go.microsoft.com/fwlink/?LinkID=226022.