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In X11 terminology, the Window Manager or WM is the application which is responsible for managing actual windows as they appear on the desktop. Typically a Window Manager also is responsible for drawing window-decorations such as titlebars and interface controls such as "maximize", "minimize" and "close" buttons. WMs allow movement of windows around the desktop, as well as managing the "Z-order", that is the order that the windows stack atop each other.
There are a vast number of WMs in existence and users can sometimes become very emotionally entangled with their WM, although this practice is considered old-fashioned.
Some window-managers such as Openbox provide a desktop menu which can typically be accessed by right-clicking the desktop when the window manger is used standalone, without other desktop programs.
Most window-managers also provide for basic desktop management, often with the concept of "virtual desktops".
An emerging next-generation window-manager is Compiz, which provides very sophisticated effects such as animations, three dimensional window and desktop management, shadows and transparency and entirely novel window management concepts.
KDE and GNOME both provide their own window-managers, KDE's is called "Kwin" and GNOME's is called metacity. Both KDE and GNOME support other window managers such as Openbox and Compiz

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