Disk image = create a backup image of your hard disk, to restore later instead of reinstalling. It sounds like you're thinking of creating backups of optical discs.

Narmy nailed it on the head, you misunderstood entirely. disk with a k is magnetic, disc with a c is optical (de facto, though not de jure). If you image your hard drive after installing an upgrade, then you can just restore to that to re-install it and not need to install multiple versions of Windows. It's even better than reinstalling Windows normally, as you don't have to create a profile, install as many Windows updates, or even reinstall your favorite software.

It's fine and dandy so long as it's done with a new rig, but the OP is just upgrading his OS on an existing rig. You cannot legally use OEM versions of Windows to do that.

Since this happens to have become on topic: last year I used an OEM because I picked it up accidentally, and I just wiped my hard drive to make it work*. Was that legally acceptable?

*(I had been planning on uninstalling damn near everything I had ever installed anyway - I used to be way worse at uninstalling things I no longer used. It was easy enough to just transfer everything I cared about to other media)

You must be a system builder (assemble the PC) and even have to use http://www.microsoft.com/oem/en/downloads/pages/windows_7_opk.aspx to qualify to use the OEM System Builders license.

D:

I bought mine at a store and threw it on my laptop. I'm a horrible person.

The system builder license is probably the most confusing license there is, as there's all sorts of hoops to jump through and whatnot. General conventional wisdom (backed by now-dead pages) is that you have to build the computer and use OPK if you plan on selling it to provide the license to the end-user. The OPK step can be skipped if you are building it for your own use, as you read it when you install. As mentioned, the web pages that had this don't exist anymore (taken down shortly after the release of Windows Vista), so it's up in the air whether OPK is needed for building it for yourself or not.

That said, putting it on a pre-assembled laptop is never kosher for the System Builder license

Well, I did build my PC, but it's a moot point because I was totally joking before and would never do that!

Thank you for the information!

I would recommend waiting for Windows 8 as it is coming out this year!

I've bought and installed OEM versions (of older versions of windows) previously when I built a new system - never used the OPK .

I doubt that it is required, it looks like a utility to ease corporate builders jobs when setting up many new systems - looks like a total waste of time for a build of a single system.

Frys will sell OEM version to you if you buy a new motherboard