From Sue Chastain,
Your Guide to Graphics Software.
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Many of the major software publishers are beginning to incorporate product activation into their applications. Do you know what it is and what it means to you as a consumer?

A. Product activation is an attempt by software companies to reduce piracy by ensuring that users have a legitimate license to use the software they have installed. Products that utilize activation will function without being activated for a limited time period (usually 30-45 days) and will cease functioning if activation does not occur within this timeframe. Activation generally involves connecting to an Internet site or calling a toll-free number so your serial number can be authenticated and matched to your system through the use of a unique, randomly generated hardware ID. If your system hardware changes significantly and a software reinstallation is required, re-activation may also be required.

Product activation is said to be anonymous, but many people are opposed to it because they feel it is an invasion of privacy, a nuisance, and/or a security risk. There is also some speculation as to what will happen with products that require activation in the event that a software company goes out of business or the program is discontinued. Product activation is not the same as registering your software and is intended to be simple and hassle-free for legitimately licensed software users.

Graphics Glossary