Microsoft uses different tags to categorize the licensing status of a Windows Vista operating system. Prior to activation, the operating system is situated in the 30-days grace period. Microsoft delivers the full functionality of Vista throughout this time, and the only interference the user will get are the periodical activation notifications. This is the Windows Vista Initial Grace or OOB Grace.

"Initial Grace (or OOB Grace) starts the first time you start your computer after you install the operating system. It provides 30 days for the computer to be activated. The Initial Grace period can only be restarted by running sysprep /generalize, or by using slmgr.vbs -rearm. These processes reset the Initial Grace timer to 30 days. This will only work three times," reveals Microsoft.

If the copy of the operating system is successfully activated within the grace period, Windows Vista enters the Licensed status, designating the validity of the activation process via an individual serial key, or through MAK or KMS volume licensing keys.

Windows Vista non-Genuine Grace involves a system with the Windows Genuine ActiveX control installed and that consequently fails the Genuine Validation process. "The computer is marked non-Genuine, and the License State may be changed to non-Genuine Grace. If this happens, non-Genuine Grace provides 30 days for the computer to be re-activated and validated Genuine by re-visiting the WGA website," explained Microsoft.

Windows Vista Out-of-Tolerance Grace refers to an operating system that has been successfully activated but which requires re-activation, due to extensive and cumulative hardware modifications. KMS clients that have gone for 180 days without contacting a KMS also enter OOT.

Unlicensed Windows Vista is a status applied to an operating system that has expired the 30 days grace period. "An Unlicensed computer runs in Reduced Functionality Mode (RFM), which provides users very limited access to the system in one-hour increments, and presents a window containing links to properly license and activate the computer," added Microsoft.

In conclusion, these are the five license states that Microsoft uses to track the activation of Windows Vista: Licensed, Initial Grace (OOB), Non-Genuine Grace, Out-of-Tolerance Grace, and Unlicensed.