Windows update-"Genuine Advantage Validation Tool"--what is it?

I just got my computer back from a repair shop, including a new install of Windows XP service pack 3.
(using my original licensed CD’s of Windows XP)

Now, I suddenly get a message telling me that I need to check for updates. The link looks good, and takes me to Microsoft’s site
– http: //update.microsoft. com/windowsupdate/v6/default.aspx?ln=en-us ----
and recommends that I install updates.

It seems logical to me, so I click on “download now”—
But then I get worried and hit “cancel” when I see that I am downloading something called “Windows Genuine Advantage Validation Tool”.
Why do I need validation, and what is this all about?

So help out a technophobe:
What does this do?
Do I need it?
Am I being overly paranoid?

Just so MS knows your version is offical

First link btw on google searching for Windows Genunie Advantage

What does it do?

WGA is the component that Microsoft added some years back that will attempt to cripple your computer if it thinks you are unlicensed. It hooks into the winlogon process and several other components to accomplish this.

Do I need it?

Sort of. If you don’t install it, you will eventually find yourself locked out of Windows Updates and other optional downloads from Microsoft.

Am I being overly paranoid?

Considering how much useless crap is installed on most machines, even by legitimate companies (ex. Microsoft, Dell, etc.), I don’t think this is paranoid at all. We’d see a lot less of this kind of nonsense if more people started asking pointed questions of their software vendors, like: “what the heck is this, why are you trying to install it, and what happens if I say ‘no’?”

yeah, I saw that link, too…but it contains a lot of tech-talk mumbo-jumbo—including accusations of spyware.
So I thought I’d ask here at the Dope for advice from smart people who may have actual practical experience .

WGA detects unlicensed copies of windows, office, and other MS products. The lack of it will not block critical security updates, but anything that needs WGA validation will not work. For instance, you do WGA validation when trying to update your directx install. If you do not have WGA installed locally then the microsoft webserver will ask you to install it. I dont think you should install it if you dont feel comfortable with it, but its really not a big deal either way.

>including accusations of spyware.

MS has pretty good privacy policies. I dont want to turn WGA into a big discussion on privacy but a lot of companies loved by the loud-mouth anti-MS people really arent any better, and are usually much worse (never expiring google tracking cookie).