Why is there cheap "OEM" software on eBay and elsewhere and what is it really?

OEM stands for Original Equipment Manufacturer and means software which comes pre-installed on computer hardware you buy.  When you buy a new laptop, and it comes with Windows Vista and perhaps a program for burning CDs and DVDs that software is referred to as OEM - otherwise it is bought in a shop afterwards ("Retail" or "Box Product") or supplied as part of a plan or subscription where it would be too complicated to buy so many boxes of a program (Volume Licensing allows you to install say one copy of Microsoft Office 500 times for your company).

A lot of eBayers refer to OEM software as software which is cheaper because there is no box, no manual and no other encumbrances which drive the price up.  This is not true, in fact it is illegal to have OEM software installed in most cases more than 90 days after you bought the computer.  The price of OEM software is lower but should be built in to the price of a computer making it easier for you to buy a computer which is "ready to go" rather than having to make ten or more purchases to get a working computer.