I recently read that Windows OEM products can only be installed on one computer and never transfered to another. Does this mean that if your machine dies and needs replacing or you want to upgrade the machine itself that you would have to purchase a another OEM machine or retail O/S and you would simply loose the other O/S? If so how would it be known?

OEM versions are supposed to be sold with computer hardware, and yes, for the most part, the OEM software is then married to the machine. There's some gray area if you purchase the OEM software with a hardware component, as was allowed until September of last year, but for most circumstances yes, legally, OEM software is tied to the machine it's purchased with.

That sucks! But I guess thats why its so much cheaper.