OEM versions are intended to be sold with hardware, although many retailers
will sell them with any hardware, even a pen drive that could not possibly
hold the operating system.
As far as Microsoft is concerned, they sell OEM software cheaper, because
they do not provide support for it, except for the monthly patches. Support
is provided by the hardware vendor, such as Dell, Gateway, etc. But, in
this case that would be YOU. Do you feel up to it? Maybe yes, since after
the initial installation, Microsoft really does not help much with problems,
unless you use their pay-service. And, there are many user forums and
information websites to help you.
Another "feature" of OEM software is that it can be installed only on one
set of hardware. This is usually taken to mean one motherboard. If the
motherboard is replaced you may not be able to re-activate the OEM software
on a new motherboard. However, I have heard stories of home users that have
received some compasion from Microsoft, in the case of a dead
PC/motherboard. But, moving to a newer/bigger/better PC would generally not
be approved by Microsoft.
In the case of XP, the "repair" option is missing from the OEM version. You
either clean install or nothing. However, the recovery console is still
available, although that is very limited in what it can fix. I am not sure
about Vista, but you might want to check into that and similar topics before
decidign on OEM software.