For Windows 7, Windows Genuine Advantage was renamed to Windows Activation Technologies, and it is this set of technologies that will be updated coming February 16. The update will "detect more than 70 known and potentially dangerous activation exploits", and "will determine whether Windows 7 installed on a PC is genuine and will better protect customers' PCs by making sure that the integrity of key licensing components remains intact".
Since the number and type of activation cracks out there change all the time, the update will phone home every 90 days to gain information on newly discovered activation exploits (Microsoft promises the information sent does not contain any personally identifiable information). Users with genuine copies of Windows 7 will see nothing - the update runs in the background. Users of a non-genuine copy of Windows 7, however, will get a dialog presenting them with options to fix the issue.
Contrary to earlier versions of Windows, however, there will be no reduced functionality mode. The desktop will switch to a plain desktop, and a reminder will be displayed every now and then. Users' files, applications, shortcuts, whatever, will remain intact and usable.
It will be made available to all Windows 7 Home Premium, Professional, Ultimate, and Enterprise edition users starting February 16 from Microsoft.com/Genuine, and from the download centre the day after. Later this month, it will appear on windows Update, tagged as "Important" - but still optional.
This is supposed to be an anti-piracy thing, but the effectiveness of it all is, well, laughable, at best. The update is entirely optional, and if, perchance, you were to accidentally install it anyway, you can uninstall the update and be on your merry way. In other words: you're free to not install it, which makes the update completely pointless and a waste of time.