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It assesses the CD that put in and compares it to the database of song names online and then gives you the correct one. Imagine if you had a new CD it would have to go on the net to get the info as it wouldn't have the information on your computer as the information comes from the net and not...
Yeah that's the latest version, as your computer is crashing I presume it's a Windows computer.
Can you access the iTunes store? If you can then that would suggest that the program can access the net ok.