If you're running your site on a local, virtual (unmanaged), or dedicated (unmanaged) machine, the sendmail function needs to be set. This requires installing a mail server. This is a high occurrence issue with WAMP & XAMPP, or just plain A/M/P.
You'll find it tough to set one up on Windows. You also need to forward port 25 if it's not already done -- some hosts do not allow this, nor do most ISPs (for local web servers), only port 80 and other minimally required ports.
The best way to counter is to order a shared hosting package from a webhost.
If money is an issue, and you have a domain and don't mind not having cPanel, I recommend nfoservers.com for a basic web hosting package (very reputable, only $2.99 unlimited everything and true DDoS mitigation). If you don't have your own domain, they do offer two choices of a subdomain, as well as a 2 day free trial with no money required.
I have hosted countless PHP-Fusion sites with them, and have absolutely no issues. I have many issues with a lot of hosts and 500 internal server errors, but never with that one.
In addition, make sure your browser is not automatically filling in the SMTP form on the settings page. Visit the page, clear the fields, and save. Then visit your main settings page, and ensure that the "admin email" is a valid one.
You can then test by registering an account with a valid email, or just test the lost password function.
(Apologies to staff if I may not suggest a host here, if so, please edit it out, and I am sorry -- just trying to suggest convenience and cost wise)
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