This week, Microsoft finally admitted what many of us have suspected for quite some time: Its Windows Genuine Advantage (WGA) anti-piracy tool is faulty and has mistakenly identified hundreds of thousands of valid Windows installs as pirated. Meanwhile, over 22 percent of all Windows installs that have gone through the WGA validation process have been correctly identified as pirated, making the program a huge success, at least from Microsoft's perspective.

According to Microsoft, over 512 million users have attempted to validate their systems via WGA. Of those, 114 million installs, or 22.3 percent, were judged to be invalid, or pirated. Microsoft told "InformationWeek" that this figure is quite a bit lower than the overall global software piracy rate, however, which is estimated to be 35 percent of all software used worldwide.

Of the 114 million invalid Windows installs flagged by Microsoft, 56,000 users filed a counterfeit report in order to obtain a legitimate Windows copy from Microsoft. These reports require the user to identify the system builder or other party who provided them with the suspected pirated copy of Windows, which explains the relatively low response rate.

While Microsoft hasn't admitted to the exact number of Windows installs that were mistakenly identified as pirated, David Lazar, the director of WGA at Microsoft, says it is less than "one-half of one-percent" of the systems WGA has verified. That means that over several hundred thousand Windows users might have already been accused of piracy by Microsoft and be forced to undergo the painful process of discovering what went wrong and convincing WGA to certify their installs. Microsoft says that in most cases, it is able to determine what went wrong and fix the problem. However, the burden is put on the user, which underscores the reasons for the criticism Microsoft has received since launching the WGA program.

Next week, of course, Microsoft will formally launch Windows Vista to consumers and as you might expect, this next version of the operating system comes with an enhanced version of WGA. In Vista, systems that are suspected of being pirated will run in a reduced functionality mode so that users can copy data off the PC and perform other related tasks. However, none of the built-in Vista applications except for Internet Explorer 7 will work normally in this mode.