It doesn't get deactivated. When you try to activate on the new computer you'll need to call microsoft and tell them that you're changing the computers that you installed it on. You'll then read them a really long number, and they'll read another one back to you that you type in. That activates windows on that computer, and now every time you want to install windows XP on there, you can just use the internet activation.
In my experience, it is still possible to install windows on the original computer and activate without calling microsoft even after you activate the second pc.