This courtesy of MS: -
Activating Windows XP
Windows XP includes a new antipiracy feature called Windows Product Activation (WPA). As in previous Windows versions, you must enter a 25-character product key during the Setup process. WPA adds a new requirement: After Setup completes, you must activate your installation within 30 days, either by connecting to a Microsoft activation server over the Internet, or by calling a toll-free number and speaking with a customer service representative at a WPA clearinghouse.
WPA is a mechanism designed to enforce license restrictions by preventing the most common form of software piracy, casual copying. Typically, a Microsoft Windows XP license entitles you to install the operating system software on a single computer. If you use the same CD and product key to install Windows XP on a different system, you’ll be unable to activate the software automatically. Here’s what you need to know about WPA:
Under most circumstances, activation is automatic and instantaneous. If you purchase a shrink-wrapped copy of Windows XP and install it on a new computer, you can activate over the Internet, and the process should take no more than a few seconds. If you need to use the phone, the process takes longer, because you have to read a 50-digit identification key to the customer service representative and then input the 42-digit confirmation ID supplied by the clearinghouse representative, as shown in Figure 2-3. Within 30 days of installing Windows XP, you must activate the software. If you choose the phone option, you’ll see a list of toll-free numbers.
Activation is not registration. The activation process is completely anonymous and does not require that you divulge any personal information. Ifyou choose to register your copy of Windows XP, this is a completely separate (and optional) task.
You’re allowed to reinstall Windows an unlimited number of times on the same hardware. During the activation process, Windows XP transmits an encrypted file that serves as a "fingerprint" of key components in your system. If you reinstall Windows XP on the same hardware, the activation server checks the new fingerprint against the one stored in its database. If they match, activation is automatic.
When you install a retail copy of Windows XP, you’re prompted during the final stage of Setup to activate the product. We recommend that you choose not to activate it immediately. Instead, give yourself at least a week to verify that Windows XP works properly on your hardware and that you won’t be required to replace any hardware or the entire computer. After you’re confident that Windows XP is completely compatible with your hardware, you can safely activate. Use the persistent reminder balloons in the notification area, or click the Start button and choose the Activate Windows shortcut at the top of the All Programs menu.
Multiple hardware upgrades may require you to reactivate Windows. The activation software is designed to prevent attempts to "clone" an activated copy of Windows and install it on another computer. If you replace or upgrade four or more components from a list of 10 components on your computer in a period of 120 days or less, the activation mechanism may mistakenly assume that you’ve installed the operating system on a new computer. In that case, you’ll be required to call the WPA clearinghouse and get a new activation code. The list of components included in the hardware "fingerprint" includes your video card, primary hard disk, disk controller, CD-ROM drive, network adapter, CPU, and RAM. It does not include Zip drives, digital cameras, or similar peripheral devices.
Copies of Windows XP sold with new computers may be exempt from WPA. If you purchase a new computer on which Windows XP is preinstalled, the activation process may have been completed before you took delivery. In addition, copies of Windows sold this way are frequently tied via software to the BIOS of that computer. You may reinstall that copy of Windows XP an unlimited number of times on the computer it came with, regardless of how many upgrades you make. However, you may be prohibited by the license agreement from transferring that copy of Windows to another computer.
Many corporations are also exempt from WPA requirements. Businesses that purchase as few as five copies of qualified Microsoft software, including Windows XP, through a Microsoft volume licensing (VL) program receive VL media and product keys that do not require activation. Under the terms of a volume license agreement, each computer with a copy of Windows XP must have a valid license.
For more details on volume licensing programs for Windows and other Microsoft software, read the Microsoft Licensing FAQ at
http://www.microsoft.com/business/licensing/faq.asp.
Want to prevent at least some activation headaches? Make a backup copy of Wpa.dbl, a tiny file stored in the %SystemRoot%\System32 folder.
This file contains the hardware "fingerprint" information used to determine whether activation is required. If you need to reinstall Windows XP on a system that has already been activated, you can restore this file and bypass the need for activation—if your hardware hasn’t changed appreciably since the original activation. Windows also creates a backup copy of this file, called Wpa.bak, at startup. This backup copy can be a lifesaver if you encounter problems after a hardware upgrade. If Windows refuses to run because your new hardware has triggered the activation code, you may be able to recover using this workaround: Restore your old hardware, start your computer in Networked Safe Mode, and rename Wpa.bak to Wpa.dbl. If all goes as it should, you’ll be reactivated and able to continue working.
Since the advent of "service pack one" all known corparate keys and certain othe issues have been addressed concerning XP's abitilty to update i.e. you could find you installation disabled if you attempt to apply this service pack.