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Update: I published a new guide that explains how to reset the Windows 8 administrator password without the need of any third-party tools.
NTPWEdit is a free tool that allows you to reset a Windows password without knowing the administrator password. Of course, this only works if you access the Windows installation offline and boot from a second Windows system. NTPWEdit officially supports Windows 2000, XP, and Vista, but I have used the tool to reset the password of a Windows 7 installation.
After you launch the tool, you have to specify the path to the SAM file that contains the local passwords. On most systems this is C:\WINDOWS\SYSTEM32\CONFIG\SAM. The tool displays the available accounts when the SAM file is opened. After you reset the Windows password of a certain user, you have to save the changes.
NTPWEdit also allows you to unlock the built-in administrator account. This can be useful if you don't know which of the accounts on the system where you want to reset the password has admin privileges. I recommend disabling the local administrator account once you have access to the system. I covered the abilities of the built-in administrator account in detail awhile back.
I think NTPWEdit belongs in every admin's tool box. Resetting Windows passwords on user laptops is a common task. I have tested NTPWEdit on Windows PE 3.0, and it worked without problems. The other famous password reset tool, Windows Password Renew, appears not to work on Windows PE 3.0.
As mentioned above you have to launch NTPWEdit from a second Windows installation. If you have not yet built your own rescue stick please read my instructions for how to boot Windows PE 3.0 from a USB drive. Also check out my article of how to reset the administrator password.