You say that no information is sent to microsoft. Hmm, then what is
sent to microsoft that is so unique that makes it that the copy of XP
is specific to the machine ??
What happens is that the activation routine computes a hash code,
using identification of each hardware item. That's both stored on
your computer and sent to Microsoft.
There's nothing there that identifies you or even the specifics
of your machine.
Also when I wish to deinstall it from machine A to install it on a new
machine Machine B, how do I deactivate is from A before I rectivate
it for B ?
You do not. There's no such thing as deactivation, nor is it
necessary. You just remove XP from the old machine, install it on
the new one, and reactivate the new one. If it's been over 120
days, reactivation will be accomplished over the internet just as
easily as the first time. If it's been fewer than 120 days, it
will require a quick voice call to an 800 number, explaining what
you've done. They will trust you and give you a number to enter.
I know the licence is for one machine, but if the machine Burns in a
fire I would want to reinstall my licence for 1 machine on an new one
and I have bought a licence for 1 machine ? correct ?
You can do this *only* if yours is a retail copy. An OEM copy, on
the other hand, has its license permanently tied to the first
computer it's installed on. If that computer dies, the license
dies with it. For that reason I do not recommend getting an OEM
copy.