We have claims based authentication enabled on our SharePoint 2010 environment. None of the account display names are correct for users.
I tried the solution listed here: Inconsistent user names in SharePoint but it did not fix the issue.
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Usernames display as "domain\username" when User Profile Synchronziation has not yet been configured or there is issues with the service application / synchronization once it has been setup. Here is the MS TechNet information on how to configure User Profile Sync - http://technet.microsoft.com/en-us/library/ee721049.aspx.
First you have to setup the User Profile Sync service. If you dont want to wait until it will update you can use this approach: Having fun with the SharePoint Welcome.ascx control