If your PC died, and you had to get a new one, then you could technically use the same Windows product and key, because it wont be being used on the other PC

The same applies to MOST programs, but Windows especially: you MUST install from the CD, it cannot be cloned.
Other programs MUST be installed to work properly, and not just copied across (this applies to at least 80% of programs). The install will not only put the files/folders in the directories, but also add many lines to the Windows Registry (database) and may have to interact with hardware.... INSTALLS ARE IMPORTANT!