The product key is not stored on the CD. if it was anyone could copy the cd, and a product key would then come on the pirate disk.
Somewhere hidden in the windows program is a 'matamatical formula' that will take the product key, do a bit of maths on it, and if the key is a valid one, the result will come out 'correct' so to say..
Sort of like A=1, b=2 and so on through the alphabet to z=26, then 0=27, 1=28 etc.
it add, subtracts, multiplys or devides the various digits of the key together in a certian complicated order, and if the product key is a good one the result of the formula will be whatever m/soft decided was the correct answer (or perhaps one of several possible answers) just guessing wont work, as you dont know what the sum is, what answer you want to get, or what value is given to any particular letter or number.
It is basically a secret code, and we dont know how to decode it.