Possible locations for init.m files include the following:
$BaseDirectory/Kernel kernel initialization code for all users
$UserBaseDirectory/Kernel kernel initialization code for the currently logged-in user
$BaseDirectory/FrontEnd front end initialization code for all users
$UserBaseDirectory/FrontEnd front end initialization code for the currently logged-in user
I have my init.m in the following folder
C:\Documents and Settings\All Users\Application Data\Mathematica\Kernel\init.m