Untangling Windows license confusion

In the comments to an earlier post on Windows licensing, Pam asks:

I recently bought a used computer(windows 98) because my old one died and I have a back-up copy of windows xp from my old computer, can I use the windows xp cd and install it on my windows 98 computer?

The correct answer, of course, as with all things Windows-related, is, “Maybe.” Before I can answer that question, I need two additional pieces of information:

1. What type of license was included with the original copy of Windows XP? If it was an OEM copy that came preinstalled with the computer, then no, you can’t transfer it. The terms of an OEM license say you can run it only on the computer on which it was installed originally. If it was a retail copy, either a full copy or an upgrade, then …

2. What happened to the old computer? If you’re still using it, or if you sold it or gave it away without completely removing Windows XP, then no, you can’t legally reuse the license. But if you completely wiped it clean and kept the CD, the product key, and the certificate of authenticity, then yes, you can install it on the new computer.

Note that there’s a difference between you can legally do and what you can do in practice. Legally, you can have Windows XP installed on only one computer at the same time. In practice, however, you can activate your copy of Windows XP on a second computer, maybe even a third or fourth, by activating each subsequent installation over the phone and telling a tall tale to the agent on the phone.

For more questions (and answers!) about licensing Windows and Office, see How much do you know about Microsoft licensing? at ZDNet.