License and media types

There are three main types of licenses for Windows XP Professional and Professional x64: Retail, Volume (VLK), and Original Equipment Manufacturer (OEM). Windows XP Home Edition is limited to Retail and OEM licenses, whereas Windows XP Media Center Edition and Windows XP Tablet PC Edition are exclusively available through VLK and OEM channels.

Each type of license has a different installation CD. For customized or retail media, there is a small difference on each type of disc that will allow that installation disc to accept only one type of product key.

Only retail and volume licenses include support for end-user installation scenarios from Microsoft. OEM software is preinstalled on systems and is supported by the system manufacturer rather than Microsoft. The price of such software is lower. There are two important restrictions on OEM licenses: Microsoft does not offer technical support, and the license cannot be transferred to another computer. The cost of OEM software products bundled with systems is not disclosed by Microsoft nor by its partners, as each system manufacturer will define its own bundling price.

Microsoft recommends that system manufacturers have their systems tested, for a fee, as part of the Windows Quality Online Services (Winqual) which includes extensive testing so that no component will cause instability in the Windows operating system due to incompatibility with the Windows operating system or with other system components or their respective drivers. Having a system tested and approved will allow the manufacturer to bear the "Certified for Windows" logo sticker on the exterior of the system, and there are additional benefits for having a tested product. This includes the product's being listed on the Windows Marketplace. Because of the fees and extensive requirements, Microsoft acknowledges that smaller system manufacturers may not opt into the program until they produce computer systems at a modest rate and on recurring designs.

Retail

Retail licenses, those purchased from a retail store in complete packaging, are of two sub-types: "Upgrade" and "Full Purchase Product", often abbreviated by Microsoft as FPP. FPP licenses are transferable from one computer to another, provided the previous installation is removed from the old computer. Although upgrade licenses are also transferable, a user must have a previous version of Windows even on the new computer to which they are moving the installation. Retail licenses include installation support for end-users, provided directly by Microsoft.

Volume License

A Volume License is the license given to a software version sold to businesses under a direct purchase agreement with Microsoft, and is sold as an upgrade license only, meaning that a previous license must be available for each new volume license. Volume license versions of Windows XP use a Volume License Key (VLK), which is a product key that does not require product activation. The term "Volume License Key" refers to the ability to use one product key for multiple systems, depending on the type of agreement. Since Windows XP Volume License versions do not require product activation, this led to leaked copies of VLK media and product keys from businesses leading to piracy of Windows XP quickly spreading across the Internet upon early release. Beginning with Service Pack 1, Microsoft's active attempts to search out and blacklist known pirated VLK product keys became well known due to the inability to install the service pack on a system with one of the blacklisted keys. Later, this led to the Windows Genuine Advantage program.

Original Equipment Manufacturer (OEM)

Original equipment manufacturer (OEM) licenses are preinstalled on, and sold with, pre-assembled computers from system manufacturers. There are two types of OEM product types — those used for "direct OEMs" (major name brands that buy through a direct contract with Microsoft and produce and brand their own media from a Microsoft "Gold Master Copy" by using an authorized Microsoft duplication partner), and those used for "system builders" (local computer shops that buy generic, unbranded kits through authorized Microsoft distributors). Direct OEM product keys will often not activate with system builder installation media because direct OEMs are now required by Microsoft to pre-activate their copies in the factory using their own internal mechanism before delivery to the customer. It is recommended that system builders also pre-activate their systems before delivery, but this is not mandatory.

OEM installations can be customized using the Microsoft OEM Preinstallation Kit with branding, logos, additional applications, optional services, alternate applications for certain Windows components, Internet Explorer links, and various other customizations. All OEM customers must include support and contact information for the initial installation of Windows because it is the responsibility for the OEM to support the Windows installation, and is not provided by Microsoft to the end-user. Direct OEMs must create their own media, but have the option of creating their own custom recovery solution, which may or may not be similar to a generic installation. Direct OEMs may provide a recovery partition on the hard drive as the custom recovery solution rather than providing disc-based media with the computer.

Some end-users have found this to be a troublesome option, because in the event of an out-of-warranty hard drive failure, they may not have access to any installation media in order to reinstall Windows onto a new hard drive. System builders are not allowed the option to create a custom recovery CD/DVD media. The only deliverable media available for a system builder to give to the end-user is the unbranded OEM system builder hologram media kit. Because of this, when end-users reformat their hard drives and re-install from the installation media, they lose all the custom branding and support information that the system builder would have included.

As a supplemental recovery method to a CD/DVD-based installation, a system builder may employ a fully customized recovery solution on the hard drive. Whether utilizing a recovery partition or not, a system builder must still include the original generic OEM system builder hologram CD/DVD media kit. OEM licenses are not transferable from one computer to another. Every computer sold/resold with an OEM license must include all of the original installation media or recovery solution, documentation, Certificate of Authenticity, and product key sticker with the sale. Microsoft requires that all OEM system manufacturers include as part of the configuration the Windows Out-of-Box Experience (OOBE), which is the initial setup wizard encountered the first time Windows boots up. It is also required that value-added resellers (VAR's), retailers, and general resellers not tamper with the OEM's customized OOBE mechanism unless under permission by the OEM, and it is a recommended configuration for systems that are privately resold so that a customer will have a like-new computer experience upon first boot-up.

OEM licenses are to be installed by professional system manufacturers only. Under Microsoft's OEM License Agreement, they are not to be sold to end-users under any circumstance, and are to be preinstalled on a computer using the OEM Preinstallation Kit (OPK) before shipment to the customer, and must include at the very least the manufacturer's support contact information. They are, therefore, designed for installation only on a single computer and are not transferable, even if the original computer is no longer in use. This is not usually an issue for users who purchase new computer systems, because most pre-assembled systems ship with a preinstalled operating system. There are few circumstances where Microsoft will allow the transfer of an OEM license from one non-functioning system to another, but the OEM System Builder License Agreement (SBLA), as well as the OEM End User License Agreement (EULA) do not contain any allowance for this, so it is entirely up to Microsoft's discretion, depending on the situation.

Non-use by end user

In the event that an end user decides that they do not wish to use a preinstalled version of Windows, Microsoft's End User License Agreement (EULA) provides that the software may be returned to the OEM for a refund. Despite refusal of some manufacturers to honor the entitlement, it has been enforced by courts in some countries.