Brian Livingston of Windows Secrets has authored a piece which discusses the method of activating Windows. His article will not be published on their site for sometime but they've given us permission to host his story on our servers.
As most Windows users know, Microsoft has required "product activation" since the release of Windows XP in 2001. XP must be activated by communicating with servers in Redmond within 30 days of installation. By contrast, Microsoft Office XP, 2003, and 2007 require activatation before the package is used 5 to 50 times, depending on the version, according to a company FAQ. If a PC has no Internet connection, a user may activate a product by dialing a telephone number in various countries.
The activation process will complete successfully only if the software has not been previously activated, such as on a different machine. If activation isn't completed within the trial period, Microsoft products temporarily shut down some of their features. MS Office loses the ability to edit and save files. After Vista's activation deadline runs out, the user can do little other than use Internet Explorer to activate the operating system or buy a new license.
You can download his story here.