TweakTown has put up an article concerning the Product Activation of Windows XP

Windows Product Activation (WPA) is a technology used to enable/activate a copy of Windows XP for a specific PC. Under the Microsoft Agreements, users are allowed to install Windows XP on one machine. When you activate Windows XP, it analyzes key components on your computer (hardware) and creates an internal value that is combined with your product ID code. This makes a 50-digit number called the Installation ID. The number is then transmitted to Microsoft in exchange for a 42-digit Activation ID that activates Windows XP. If you attempt to activate a copy of Windows XP from another machine, you will be unable to since there already is a computer in the database.

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