Reference
Microsoft licensing glossary
Plain-English definitions of the terms you will see on every product page, invoice and Microsoft activation prompt.
If a term in our buying guides, comparison tables or product descriptions is unfamiliar, look it up here first. Definitions are intentionally short — most fit in two sentences — and every entry links out to the in-depth guide when you need to go deeper.
A
- Active Directory
- Microsoft's directory service that stores user, group and computer accounts for a Windows network. Runs on Windows Server with the AD DS role.
- Always On Availability Groups
- SQL Server Enterprise feature for high-availability replicas of one or more databases across multiple servers, with automatic failover.
- Azure Hybrid Benefit
- Discount that lets organisations re-use on-premises Windows Server or SQL Server licenses with Software Assurance to lower the cost of Azure VMs.
B
- BitLocker
- Full-disk encryption built into Windows Pro and higher. Uses TPM-bound keys so the drive is unreadable if removed from the original machine.
Related guide: Enable BitLocker
C
- CAL
- Client Access License — required for each user or device that connects to a Windows Server, SQL Server or Exchange Server. Sold per-user or per-device.
- Click-to-Run
- Streaming installer technology used by Office 2016+ and Microsoft 365. Downloads a small bootstrapper that streams the rest of the suite and keeps it updated monthly.
- Core licensing
- Windows Server and SQL Server are licensed per physical core (with a 16-core minimum per server for Windows Server). Hyper-threading does not count — only physical cores.
Related guide: SQL CAL vs Core
D
- Domain Join
- Adding a Windows PC to an Active Directory or Entra ID domain so it can use central sign-in, group policy and shared resources. Requires Pro or Enterprise.
E
- ESD delivery
- Electronic Software Delivery — your product key and download link arrive by email after checkout. The industry-standard digital fulfilment method since 2010.
- Extended Security Updates
- Paid security-only patch program offered by Microsoft after a product's mainstream support ends. Available for Windows 10 (ends 2025) for up to three additional years.
Related guide: Windows 10 ESU explained
F
- FPP
- Full Packaged Product — Microsoft's official name for retail boxed/digital licenses sold to end users. Transferable, not tied to hardware.
H
- Hyper-V
- Microsoft's type-1 hypervisor, included in Windows Pro/Enterprise and Windows Server. Runs Linux and Windows VMs natively without third-party software.
K
- KMS
- Key Management Service — an on-premises server that activates volume-licensed Windows and Office clients in 180-day cycles. Requires 25+ Windows or 5+ Office clients to start counting.
L
- LTSC
- Long-Term Servicing Channel — a Windows or Office release branch that gets only security updates for 5–10 years, with no feature changes. Designed for kiosks, medical devices and locked-down workstations.
M
- MAK key
- Multiple Activation Key — a volume-license key with a fixed pool of one-time activations against Microsoft's activation servers. Used by businesses for offline or unmanaged machines.
- Microsoft 365 Copilot
- AI add-on that drafts content in Word, Outlook, PowerPoint, Excel and Teams using your tenant's Microsoft Graph data. Requires a Microsoft 365 commercial subscription.
O
- OEM license
- Original Equipment Manufacturer license — sold with a pre-built PC and tied to that machine's motherboard. Cannot legally be transferred to a new computer once activated.
- Office Deployment Tool
- Free Microsoft command-line tool (setup.exe) that installs Office with an XML config — used to pick architecture, channel, language and which apps to include.
- OneDrive
- Microsoft cloud file storage. Microsoft 365 Personal includes 1 TB per user; Family gives 1 TB to each of six users.
- OSE
- Operating System Environment — one running instance of Windows (physical or virtual). Windows Server Standard licenses two OSEs per server; Datacenter licenses unlimited.
- Outlook
- Microsoft mail and calendar client. Included in Office Home & Business+ and every Microsoft 365 plan. The free 'New Outlook' Mail app replaces Windows Mail in 2024+.
Related guide: Retail vs OEM
Related guide: ODT walkthrough
P
- Perpetual license
- One-time purchase that lets you keep using a specific version of software forever. Office 2024 and Windows 11 are perpetual; Microsoft 365 is not.
R
- Remote Desktop (RDP)
- Microsoft protocol for remote access to a Windows session. Hosting RDP requires Windows Pro/Enterprise or Windows Server (Home cannot host).
- Retail license
- Full Packaged Product key sold to end users. Transferable between machines: deactivate on the old PC, activate on the new one.
S
- Secure Boot
- UEFI feature that only loads bootloaders signed by trusted keys, blocking pre-OS rootkits. Required for Windows 11 and recommended for any modern PC.
- Subscription license
- Recurring fee that keeps software activated and updated. Stops working at feature-reduced or read-only mode when the subscription lapses (Microsoft 365 example).
T
- TPM 2.0
- Trusted Platform Module v2 — hardware crypto chip required by Windows 11 for secure boot, BitLocker and Windows Hello. Most PCs from 2018+ ship with one (sometimes called fTPM in BIOS).
Related guide: Windows 11 TPM bypass risks
V
- Volume license
- Microsoft licensing program (Open, MPSA, Enterprise Agreement) for organisations buying 5+ seats. Cheaper per seat than retail and managed via the Volume Licensing Service Center.
W
- Windows Hello
- Biometric sign-in (face, fingerprint, PIN) built into Windows 10/11. Requires a TPM and either an IR camera or fingerprint reader for biometrics.
- WSUS
- Windows Server Update Services — free role on Windows Server that centralises Windows and Office updates for a corporate network instead of every PC pulling from Microsoft.
How to use this glossary
Use Ctrl/⌘ + F to search the page, or click a letter above to jump to that section. Each entry has a permalink — click the term to copy a shareable URL like /glossary#oem that lands directly on the definition. We add or update entries whenever Microsoft renames a programme (e.g. the move from MPSA to NCE in 2024).
Why Microsoft licensing vocabulary matters
Almost every expensive licensing mistake starts as a vocabulary problem. Someone buys an OEM key believing it is transferable, budgets for Windows Server without counting CALs, or assumes a volume key will activate a retail install. The words look interchangeable on a checkout page; the licence terms behind them are not.
This glossary defines the terms exactly as Microsoft's Product Terms use them, then adds the practical consequence — what changes for you when a licence is retail rather than OEM, per-core rather than per-server, or perpetual rather than subscription. Each entry is deliberately short and links to the guide that works through the detail.
- A–Z
- jump navigation with per-term permalinks
- 6
- languages, each definition localized
- 2026
- terminology checked against current Product Terms
- 0
- marketing jargon — plain definitions only
The five distinctions that decide what you may legally do
If you only learn five pairs of terms, make them these. Each one changes whether a licence can move, how many people it covers, and how long it lasts.
| Distinction | What it actually means | Consequence for you |
|---|---|---|
| Retail vs OEM | Retail is sold to a person; OEM is sold with a device | Retail moves to a new PC after deactivation; OEM dies with the motherboard |
| Perpetual vs subscription | One-time purchase of a version vs rented access | Perpetual keeps working after payment stops but never gains new versions |
| Per-user vs per-device | Licence follows the human vs follows the hardware | Per-user is cheaper when one person has 3+ devices; per-device wins for shift work |
| Core licence vs CAL | Right to run the server vs right to connect to it | Windows Server needs both — budgeting only for cores understates cost badly |
| Volume (MAK/KMS) vs retail key | Organisation-wide activation vs single consumer key | Volume keys need matching volume media; they will not activate a retail ISO |
Read your invoice like a licensing specialist
- Find the channel word — Retail, OEM, ESD or Volume. It determines transferability more than anything else on the document.
- Check the device or user count in the SKU name, not in the marketing headline above it.
- For server products, confirm whether CALs are itemised separately or missing entirely.
- Note the version year: Office 2021 and Office 2024 have different support end dates and cannot be mixed under one key.
- Confirm the licence is perpetual if you are budgeting it as a capital purchase rather than a recurring cost.
- Keep the invoice — it is the document that proves entitlement and the only way support can re-issue a key.
Glossary FAQ
- What is the difference between a product key and a digital licence?
- A product key is a 25-character string you type during setup. A digital licence (digital entitlement) is an activation record tied to your hardware ID and Microsoft account, with no key to type. Windows 11 upgrades from an activated Windows 10 install usually produce a digital licence.
- Is an OEM licence legal to buy separately?
- OEM licences are licensed for distribution with a new device. If you are buying licences to move between machines or to install on hardware you already own, retail is the channel that supports that, which is why our catalogue is built around retail and ESD keys.
- What is a CAL and do I need one?
- A Client Access Licence grants a user or device the right to connect to a Windows Server instance. The server licence alone does not include that right. Any Windows Server deployment with real users needs CALs in addition to core licences.
- What does ESD mean?
- Electronic Software Delivery — the licence is delivered as a key plus a download link rather than a physical box. The licence rights are identical to boxed retail; only the delivery method differs.
- What is a KMS key and why does mine not work at home?
- KMS keys activate against an organisation's Key Management Service host on a corporate network. Away from that network they cannot activate. Home and small-business users need retail or MAK keys instead.
- How often is this glossary updated?
- Whenever Microsoft renames or retires a programme. Recent examples include the shift of CSP purchasing to the New Commerce Experience and the retirement of Windows 10 mainstream support in October 2025.