"In many of those other scenarios, the user of the system or purchaser of the software has some knowledge that the software isn't genuine or isn't properly licensed and is perhaps not as surprised when the validation fails," Kochis wrote. "There are people who likely fall all along a range of awareness -- from mere suspicion, owing to the fact that they got a really good price online or for used software or some other 'too good to be true' deal -- to someone who has full knowledge that the software isn't genuine or licensed, and even further to those who manufacture and sell counterfeit software and are knowing perpetrators in significant and serious crime."

About 80% of those failures, or 48 million, are the result of stolen Windows volume-licensing keys, according to Kochis. For the sake of convenience, large Microsoft customers such as corporations or schools are granted a single key that they can use to install Windows XP on multiple machines. Such keys are vulnerable to being stolen and redistributed over the Internet.

"One stolen license key from a U.S. university ended up on over a million PCs in China," Kochis wrote. Microsoft plans to tighten up how it distributes volume licenses in its upcoming Windows Vista operating system.

Microsoft had previously declined to offer details about the remaining 12 million copies of Windows XP that failed to pass WGA.

According to Kochis, those 12 million failures mostly involve "a mix of other types of counterfeiting and piracy, including a variety of forms of tampering, hacking and other forms of installing unlicensed copies. Sometimes people try to hack Windows Product Activation itself (often not totally successfully, either) and other times, people try to modify files to prevent XP from needing to activate at all, he said.