:) I used to sell OEM copies of Windows.. :)
Microsofts License Requirements for OEM copies!!
The company that bundles it MUST support it. It must be bundled with a system, or in certain volume cases, with a hard drive. If the hardware is sold, the License is transferable to the new owner of the hardware. The License is NOT transferable to any other hardware. The reason for the complete version of windows is so small system builders can provide a useful recovery disk; it will not restore to sale condition, but it pacifies customers. If you have a copy of the disk, then you can actually save a bit of money by just purchasing licenses, and giving those to your customers (with a true restore cd or without a cd).
Reason MS sells Upgrades at Walmart, et al; these upgrades are for people who already have a license for a previous version, said license expires upon upgrade. The Upgrade is considerably less expensive than the retail version (usually around $200 - $400). Microsoft Supports Both the Upgrade version and the Retail version.
Now onto the Legality of the Contract. Fair Use stipulates that you (a person (or a Citizen in IRS terms)) can duplicate a copyrighted work for a variety of reasons, including to give it to a friend. At this point if you copy it and give it freely to all your friends you are not in violation of COPYRIGHT law, now you ARE still in violation of the LICENSING agreement, hence MS can sue you for real damages.
Now for the even MS programmers have to eat. It costs Microsoft approximately ($5.00) that's minus five bucks, for each copy of windows they produce, be it OEM, Upgrade, or Retail. How does this work? The greater the volume, the less it costs to produce, at some point, that cost comes close to the cost of the raw materials, plus the additional cost of minimum wage in ireland/mexico/wherever. Get a bit of advertising, AOL, MSN, and Compuserve come to mind, Throw in a bit more advertising, Gateway And Microsoft, was not sponsered by Microsoft, and you have a product that makes you money by producing it. Microsoft (Accoring to Microsoft) would make money from windows if they charged nothing for windows.
Ed: you are right about the license agreement, but violating a license agreement (as a person) without violating copyright law is not illegal. It is a civil matter.
Jack: Um, hi devils advocate.. you can see my answer
Ev'rbody: F*CK MS!!!!!! OK so that wasn't so nice of me right there.. but hey, they deserve it.