There are a lot of myths and misinformation floating about regarding Windows activation, so here's the facts in a nutshell.
With retail/store bought copies of Windows you get at least 2-3 activations within about a 6 month period before you have to call in to get an activation number.
With copies that come with a computer, they are specially modified so they activate so long as they detect that they are running on a computer made by that company. So an XP CD that came with a Dell computer should always activate on any Dell computer, but won't activate on an HP computer, and vise versa.
OEM copies you might buy off ebay or from places like NewEgg are locked to the hardware you first activated on, and that's it. If you make significant changes to the hardware of that system, you will be required to obtain a new Windows license.