Understanding Microsoft Volume Licensing

Throughout my career I've battled with Microsoft licensing as have many of you. I've heard lot's of complaints about it from almost everyone I've ever worked with. It's extremely confusing, extremely complex, and it's one of those evils that we have to live with, sort of like toe fungus. It just never goes away. I've worked with volume licensing and KMS (Key Management Server) for years. I've never fully understood how it worked, it just sort of did. It's taken me years to truly understand this thing and now that I have I want to document it for anyone else struggling to understand it. This is for my own reference if for no one else. I always wondered about that warning (see image below) that you got when adding what I always thought was a valid VL key to a server was. Now I finally get it, and all the servers I've built over the years with a CVLK key that were never intended to be licensing servers. Thankfully almost all of those were ...