If you have a pirated copy of windows, or you choose not to activate, or whatever the reason, Microsoft has chosen to allow you some functionality. Check out MS knowledge base for more info
Activities that are available:
If Windows Vista is running in non-genuine reduced functionality mode, you can perform the following actions:? Use Windows Vista features
You can use most of the features that are available in Windows Vista.
Aero Glass and the Windows ReadyBoost features that are included with Windows Vista are unavailable in reduced functionality mode.
pretty much its a 'home basic' edition
The WGA program detects a blocked product key or a counterfeit product key.
? The WGA program detects incorrect activation binary files or modified activation binary files.
? Windows Vista is in out-of-grace reduced functionality mode.