WGA phones home, even when you don't install it.

WGA - Windows Genuine Advantage. A software agent that runs on installs of Windows to make sure that you're not using a pirated copy. Unless you let it install itself, you'll have a hell of a time updating your system because a running WGA agent is required to run Windows Update. Of course, you can go to the Knowledge Base and download the updates one by one, but when you take into account how many updates there are, you may as well install it yourself.

Interestingly, if you refuse to let the WGA hotfix/update/agent/spyware install itself it phones home to tell Microsoft that a particular install of Windows will not be WGA enabled. Heise Security ran a sniffer during the process and discovered what was going on - they even posted packet captures to examine for yourself.

This is like the old joke about the guy who refused to give his Social Security number to the bank - they gave him another number and put him on a list of people that refused to give their Social Security numbers.