Transfer of ownership of Windows 7 [duplicate]

Possible Duplicate:
When reinstalling Windows 7, does the language, version, architecture (64-bit or 32-bit) or source (OEM, retail, or MSDN) matter?

I am thinking of purchasing a copy of Windows 7 via either ebay or GumTree. I am unsure as to how the product key works.

A close friend of mine is warning me against buying it from ebay as he is suggesting that once it has been used, the operating system registers itself on microsoft servers using the serial number of the motherboard of the system where it has been installed. This means once installed on one machine you wont be able to install it on another machine.

Now i am struggling to believe that an operating system can only be installed on one machine. Can someone please explain exactly how this works. I can see a lot of copies being sold on Ebay which are used. I used the 'Ask a question' option and the majority of the users are saying that i should be able to use it.

If someone buys Windows 7 from the shop, installs it on his PC but then decides that he wants to sell it can he not sell it? Will the person buying it not be able to use it? Does the person selling it have to somehow unregister it first? What do i need to look out for if buying it from Ebay?

Thanks

For details read the license to see what Microsoft will allow you to do with the software - This is the US one MS Terms of Use other countries might differ.

This includes you agreeing to activation which is explained as

Activation associates the use of the software with a specific computer. During activation, the software will send information about the software and the computer to Microsoft. This information includes the version, language and product key of the software, the Internet protocol address of the computer, and information derived from the hardware configuration of the computer. For more information, see go.microsoft.com/fwlink/?Linkid=104609. By using the software, you consent to the transmission of this information. If properly licensed, you have the right to use the version of the software installed during the installation process up to the time permitted for activation. Unless the software is activated, you have no right to use the software after the time permitted for activation.

on selling it says

Software Other Than Windows Anytime Upgrade. The first user of the software may make a one time transfer of the software and this agreement, by transferring the original media, the certificate of authenticity, the product key and the proof of purchase directly to a third party. The first user must remove the software before transferring it separately from the computer. The first user may not retain any copies of the software.