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I purchased a laptop couple of years back with Windows 7 Home Professional 64 bit pre-installed on it (OEM).

Few days back I had to format my entire hard drive and reinstall windows. I followed this method to get that done.

After installation I used the serial key from the back of my laptop to activate windows. This worked fine!

However, my friend also followed the same method and using the same key of mine he could activate his copy of windows!

I need to know how is that possible and does that put myself in risk?

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Windows will not automatically prevent you from reusing the OEM key, but it is illegal and you could at any time have the key invalidated by Microsoft for doing this at which point it won't work on any of the computers using it.

A very similar question was asked and answered here:

Can I use the same OEM windows 7 key on two computers in my house

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