Yes, it requires activation, similar to Office XP I would imagine. I doubt you need to re-activate when you install new hardware, as is the case with windows XP, but that's just a guess.
I recently bought VS .NET, but I haven't installed it yet because I've been finishing a project in VS 6 and didn't want to risk problems... One interesting thing I did see in the license agreement, is that you can install VS.NET on up to 3 machines, for testing and development, as long as you are going to be the sole user of those machines. I'm not sure how this works with the activation stuff... has anyone tried this?