1) OEM versions must be sold with a piece of hardware (normally
a motherboard or hard drive, if not an entire PC, although Microsoft has greatly relaxed the hardware criteria for WinXP) and are _permanently_ bound to the first PC on which they are installed. An OEM license, once installed, is not legally transferable to another computer under any circumstances. This is the main reason some people avoid OEM versions; if the PC dies or is otherwise disposed of (even stolen), you cannot re-use your OEM license on a new PC. The only legitimate way to ransfer the ownership of an OEM license is to transfer ownership of the entire PC.
2) Microsoft provides no free support for OEM versions. If you
have any problems that require outside assistance, your only recourse is to contact the manufacturer/builder of the PC or the vendor of the OEM license. This would include such issues as lost a Product Key or replacing damaged installation media. (Microsoft does make allowances for those instances when you can prove that the OEM has gone out of business.) This doesn't mean that you can't download patches and service packs from Microsoft -- just no free telephone or email support for problems with the OS.
3) An OEM CD cannot be used to perform an upgrade of an earlier
OS, as it was designed to be installed _only_ upon an empty hard
drive. It can still be used to perform a repair installation (a.k.a.
an in-place upgrade) of an existing WinXP installation.
4) If the OEM CD was designed by a specific manufacturer, such as eMachines, Sony, Dell, Gateway, etc., it will most likely only install on the same brand of PC, as an additional anti-piracy feature.
Further, such CDs are severely customized to contain only the minimum of device drivers, and a lot of extra nonsense, that the manufacturer feels necessary for the specific model of PC for which the CD was designed. (To be honest, such CDs should _not_ be available on the open market; but, if you're shopping someplace like eBay, swap meets, or computer fairs, there's often no telling what you're buying until it's too late.) The "generic" OEM CDs, such as are manufactured by Microsoft and sold to small systems builders, don't have this particular problem, though, and are pretty much the same as their retail counterparts, apart from the licensing, support, and upgrading
restrictions.