whats the difference between it and a retail version I'm Building a pc for a friend and it could save him abit of money if i go with oem but I wasnt sure if i could do that>

The only difference is that if you buy an OEM version, you don't get the nice pretty XP manual. The CD is exactly the same.

The other difference is that you are not supposed to re-use if if you build a new system and discard your old one.

NEVER BUY THE BOXED VERSION.

As zm notes, with the OEM version, if you change the motherboard in the system down the line, you will have to buy a new copy of the OS.

wow, that is not true about the motherbeord thing. i have installed OEM software on multiple machine each with different motherboards, i guess the elua may say such a thing, but it is not ture.
if you install a new motherbaord you more likely then not will require a reformat.

Also, no tech support with OEM????

I have only owned one copy of Windows XP, it was an OEM version that came with a Gateway laptop I bought in 2002. I have since used that CD key on at least 5 different systems ranging from a 233Mhz PII to my current 2.9Ghz AMD machine. Each time you change systems you will have to activate via telephone and assure the rep that you only have it running on one system currently, but beyond that there is no problems.

^ Basically its MS way of making sure your using 1 copy of its OS on 1 system. When you re-activate a newer config, it disables the older system you activated.

Also, when you buy an OEM PC that comes with windows, its usually tagged $100 higher for the cost of the OS. I've done the same with my dad's (OEM XP Home Edition) system with no issues.

Edit:

And on a side note, I use upgrades basically for my system.

If the EULA says that (and it does), then it must by definition be true.
Whether or not Microsoft will hunt you down and make you pay for new licenses for systems after the first one is a different matter...