A Microsoft Key Management Server (KMS) is a legitimate service offered under Microsoft Volume Activation 2.0 solution which is used to activate volume licensed Microsoft products. The KMS allows automated activation of Microsoft products for organizations within their own network, eliminating the need for individual computers to connect to Microsoft for product activation.
The internally hosted KMS server activates client computers for a period of 180 day, once a machine is activated it will attempt to communicate with the same KMS server every 7 days to renew it's activation resetting it license counter back to 180 days. If the KMS activated client is not able to re-communication to the KMS after 180 days, the machine will become unlicensed and go to it's 30 day grace period and notify the user of this change. If the machine is not activated against the KMS after the 30 day grace period it will enter a reduced functionality mode until it is able to connect to it's KMS or is changed to a MAK license key and activated with other methods.
While being a legitimate service from Microsoft for volume licensing and activation of genuine copies of there software's, KMS activation process has been exploited by pirates since Windows XP and is is still done. KMS activation is also the only working pirated crack for Windows 8 as all available Windows 8 activators are based on this method.