Windows Genuine Advantage phones home, sending the product key, manufacturer, operating system version, BIOS information and user locale setting and language back to Microsoft servers.
WGA phones home even after the particular copy has been validated. Microsoft defended this, saying its intentions are good.
when the WGA Notifications checks in with Microsoft when a PC is booted, it is not providing any information to the vendor if a PC's copy of Windows has already been validated. Instead, it is checking with a "server-side configuration setting to determine if WGA should run or not." The check-in also gives Microsoft the ability to disable the WGA program, if necessary.
It looks like Microsoft has since backed off somewhat and will only be checking on 14-day intervals.
Fortunately, OneCare blocks it. (Apparently, some have reported that ZoneAlarm does not).