The following description comes from the Windows Vista Activation FAQ located at http://www.microsoft.com/technet/windowsvista/plan/faq.mspx
Volume Activation 2.0
Volume Activation 2.0 supports centrally managed Volume License keys. It provides the following two types of keys to customers:
Customers can use any of these keys depending on the needs of their organization and its network infrastructure.
Volume Activation 2.0 supports a simplified setup, and is generally invisible to the users. By default, volume editions do not require a product key to be entered during setup. There is an automatic 30-day grace period during which the computer must be activated.
System administrators can count KMS activations using standard system management software, for example, Microsoft Operations Manager (MOM). Windows Management Infrastructure (WMI), extensive event logging, and built-in Application Programming Interfaces (APIs) can provide a wealth of detail about installed licenses as well as the license state and current grace or expiration period of MAK- and KMS-activated computers.
Volume Activation 2.0 also may provide enhanced security through frequent background validations for genuine modules. This is currently limited to critical software, but may be expanded greatly over time.
Benefits of Volume Activation 2.0
Volume Activation 2.0 provides the following two types of keys, and three methods of activation, to customers:
Depending on the needs of their organization and its network infrastructure, customers can opt to use any of these activation methods.
So what exactly is MAK activation? It uses a technology similar to that in use with MSDN Universal and Microsoft Action Pack subscriptions. Each product key can activate a specific number of computers. MAK activation is required only once, unless there are significant hardware changes. If the use of volume-licensed media is not controlled, excessive activations result in a depletion of the activation limit.
There are two ways to activate computers using MAK:
What about Key Activiation? The Key Management Service (KMS) enables organizations to perform local activations for computers in a managed environment without the need to connect to Microsoft. A KMS key is used to enable KMS on a computer controlled by the system administrator in an organization. KMS activation is targeted at managed environments where more than 25 computers are connected to the organizational network. Computers running Windows Vista activate by connecting to a central Windows Vista computer running KMS.
In case of KMS activation, client computers must connect to a KMS host at least once every 180 days to renew their activation. Computers that are not activated try to connect with the KMS host every two hours (value configurable). Once activated, these computers attempt to renew their activation (locally) every seven days (value configurable), and if successful, their 180-day activation life span is renewed.
The computers locate the KMS host using one of the following two methods:
The client computers have a 30-day grace period to complete the activation. Computers that are not activated within this grace period go into Reduced Functionality Mode (RFM). For more information about RFM, see Reduced Functionality.
For more detailed information download the Windows Vista Volume Activation 2.0 Technical Guidance document, and the Windows Vista Volume Activation 2.0 Step-By-Step Guide
For years now Microsoft is using Windows Product Activation to protect its intellectual property from