Windows Server 2008 and Windows Server 2008 R2 supports DFS-R for replicating the SYSVOL partition between domain controllers.
For this to work all domain controllers in a active directory domain need to be Windows Server 2008 or Windows Server 2008 R2 and the Domain Functional Level must be Windows Server 2008.
Every domain within a forest has its own SYSVOL directory structure that is replicated. As a result your Forest Functional Level does not need to be 2008... other domains in your forest can continue to use the legacy FRS.
If you create a new Active Directory Domain thats Windows Server 2008 domain functional level it will automatically use SYSVOL. However if you are migrating towards Windows Server 2008 DFL you will need to migrate the SYSVOL replication over to DFS-R. This migration process needs to be performed once you have raised the DFL to Windows Server 2008.
To understand the process of migrating to DFS-R for your SYSVOL directory please read the following blog posts by Mahesh Unnikrishnan, a Senior Program Manager at Microsoft. There are 5 parts to this how-to: