There are two license types for Windows 7: the full package product license and the upgrade license. While Microsoft is giving both XP and Vista users the option to buy the latter, for considerably less money, it also has some restrictions in place that make it difficult to perform a clean install using upgrade media. Specifically, the Windows 7 installer must be ran from either XP or Vista and detect an active, registered version of the OS.
So what happens if you want to install Windows 7 with an upgrade license on an empty hard drive? Technology blogger Paul Thurrott has detailed a method to bypass this restriction – and save you up to a $100 if you don't actually own a Windows XP or Vista license. The process requires users to clean install but not activate Windows 7. After the installation is completed, users must make a minor change to the Windows registry, use the Windows "rearm" command, then reboot, type in the accompanying product key and Voila!
Thurrott details two additional methods on his SuperSite for Windows blog, the first and least painful of which includes simply installing with the upgrade media as if it were full media, and only activating your copy of Windows 7 after downloading all pending updates. The other method requires users to install the operating system twice, a technique that also worked with Vista when it was launched nearly three years ago.