Windows XP or any windows version after XP is offered in mainly three categories:
- Retail version: Requires online activation with the product key supplied on box or sticker. Locked to hardware where it is activated.
- OEM Version: Comes pre-installed with new PCs like Dell/HP/IBM etc. Checks vendor BIOS information for offline activation.
- Corporate: Allocates a single key to activate the computers within the organization. Windows Vista/7 require server to be hosted with corporate keys and to track activation. In windows XP using corporate key would not require any online activation. Not locked to hardware.
Concept of Retail version is simple, you buy the box pack with the serial number and can activate online/phone. Each system generates a unquie checksum based on the hardware of the system along with the key used to activate. This gets recorded in MS database and hence activation on same hardware is carried out without any problem.
Concept of OEM version: Each vendor like Dell/HP use a separate disc known as OEM disc which contains specific files petaining to the vendor. Basically, Some information is stored in the BIOS which indicates the system is from Dell/HP etc. Now when you use the disc provided by the vendor at the time of installation windows setup detects if the BIOS contains specific vendor information. If yes, then it activates it automatically offline when setup completes. Microsoft gives single OEM key to each vendor and they can use it to sell the windows along the PC. In OEM, microsoft also provides you with stickers attached to CPU chasis or laptop backside with the OEM name and another key written on it. This key is generally not required for activation as long as you using the vendor specific OEM disc and vendor hardware. At times you may change a harddisk or motherboard gives away, you can use the second key to activate the system generally using the phone method. By selling the second key microsoft keeps a check as to how many OEM licenses got sold.
Concept of VLK/Corporate key: When XP came, MS realized it might be a pain for corporates to activate windows everytime system was re-formatted or hardware changed within a corporate. So they devised an alternate method where a VLK/Corporate key can be used to activate windows installation offline within the company. Each company is allocated One or more keys depending on the number of licenses obtained. OEM and Retail keys are tied to hardware whereas Corporate keys are not tied to hardware. Generally, corporates would take care of how many windows installations are present on their network and pay MS based on it (Could be more complex in terms of license management).
But MS realized people misused this corporate version but installating in home PCs and also license tracking. If you recall, first pirated version of Windows XP professional was a corporate edition with product key FCKGW-....... since it never required online activation. To curb this MS has come up with strategy of hosting a Key Management Server (KMS) within each organziation to track licenses. KMS will be activated from MS using key allocated to the corporate. Each system within the corporate has to activate itself every 180 days to ensure people are not misusing by installating Windows in home etc using the corporate key.
But unlike retail version OEM is locked to particular hardware and you cannot tranfer the license. This means, in retails
Another OEM license is available which you can buy when you build your own new system. With OEM licenses MS is not bound to provide you any technical support and it generally doesnt ship in box pack like retail. The onus of support lies with the big OEM vendors who sell the license or individual who owns the OEM license.
OEM licenses are cheaper than retail license but with a clause. Even if you buy individual OEM license, you agree to install it only on the new system which you bought or assembled. You cannot deactivate OEM license from one PC and use it on another. In retail version, you can move the license on any PC without violating terms (do check EULA once again) if the number of licenses are same as purchased. So effectively, same retail license can be used every time you purchase you PC, provide you deactivate from old one, where as you reuse OEM license/key if you purchase new system.