How MS Windows keys work

So here is a weird question... and hopefully it won't be closed for hacking stuff or whatever.

I have Win98 SE that came with my old computer. I was installing it last nite on a small server I was building and realized I misplaced the key for it. SO I got my hands on a key generator. It seems no matter what key I put in, it doesn't like it.

So how does it know what a valid key is? Do they have a list built into the setup program? Is it looking for a pattern? Or is there only 1 key that will work for a particular installation? I suppose the last is not true, otherwise there would not be key generators.

I'm just curious, not trying to hack anything.

IIRC it bases itsself on a pattern/list idea for each build of the kernel. What i mean is, version 1-3 might use one set of rules/patterns, and build 4-5 is something else. Most of the time the keys interchange, which is what i dont get. And versions of certain distro's that come out long after the original know the old keys.....