Microsoft includes product activation technology in some products sold 
through the Volume Licensing channel. A product key is required to activate 
these products.
With Volume Licensing for products such as Windows 7, Windows Server 2008 R2, 
Windows Vista, Windows Server 2008, and Microsoft Office 2010, you must use a 
new type of product activation called Volume Activation (VA). To activate these 
operating systems with VA, you can use either a Multiple Activation Key (MAK) or 
Key Management Service (KMS), requiring a KMS key.
Volume Activation is a product activation technology used to activate Windows 
Vista, Windows Server 2008, 2008 R2, Windows 7 and Office 2010. It is designed 
to allow Volume Licensing customers to automate the activation process in a way 
that is transparent to end users. Volume Activation applies to systems that are 
covered under a Volume Licensing program and is used strictly as a tool for 
activation and is in no way tied to license invoicing or billing.
Volume Activation provides two different models for completing volume 
activations. The first model is Key Management Service (KMS) and the second is 
Multiple Activation Key (MAK). KMS allows organizations to activate systems 
within their own network, while MAK activates systems on a one-time basis, using 
Microsoft’s hosted activation services. Customers can use either or both 
activation methods in their environment. The type of key entered in the product 
determines the activation method.
If you plan to deploy Windows 7 and/or Office 2010 
using Key Management Service (KMS) as the activation method, please note:
- 
Windows Server 2008 is not supported as a KMS host to 
activate Windows 7 and Office 2010. 
- 
A patch is available to allow activation of Windows 7 client machines. (A 
Windows Server 2008 R2 KMS key is required.)
- 
A patch is not available to allow activation of Office 2010 
clients.
 
- 
If you are using Windows Server 2008 as a KMS host, 
here are your alternatives: 
- 
Upgrade the KMS host machine to Windows Server 2008 R2.
- 
Downgrade the machine to Windows Server 2003.
- 
Run the KMS host on a Windows 7 volume edition machine.
- 
Run a Windows Server 2003 virtual machine on the Windows Server 2008 
machine.
 
If your organization has fewer than 50 PCs, the best option is to use 
Multiple Activation Keys (MAK) with Volume Activation Management Tool 
(VAMT).
While Microsoft makes every effort to cover all of its previous platforms for 
compatibility, new technologies may make it necessary to decide which previous 
versions will continue to be supported. Therefore, Windows Server 2008 is not 
covered as a platform as an Office 2010 KMS host.
Volume License Keys (VLK), including MAK and KMS, are issued to you under a 
specific license agreement and enable your organization to use the software that 
you have licensed.
VLKs can be used only with Volume Licensing products; they cannot be used 
with retail software or software that is preinstalled on a new computer 
(original equipment manufacturer, or OEM, products).
Learn about 
Volume Activation and how to activate systems using KMS and/or MAK.
ref: 
http://www.microsoft.com/licensing/existing-customers/product-activation.aspx