Why does your windows service lose its password on restart?

This is probably occurring because:

1. You are using a Domain Account as the user to run the service as
2. Your default domain policy (or another GPO) have explicitly listed which users are granted the  “Login as service” right  (and user from #1 is not in that list)

How to fix the problem:

1. Start up Group Policy Management Console on your Domain Controller (click start -> run -> type in “gpmc.msc” (no quotes) -> hit OK

2. Locate your default domain policy

3. Modify the following policy and add the account you wish to always have the “Login as a service” right:
Computer Configuration -> Windows Settings -> Security Settings -> Local Policies/User Rights Assignment -> Log on as a service