If you haven't changed any of the hardware, you'll have no problem at all.
And it will still work if even if you've changed disk drives, video cards, etc. But if you change the motherboard or if you change too many pieces of hardware (perhaps 5 or six items), you may end up having to call Microsoft for manual activation.
I thought that they were tied to a piece of hardware (such as MB) so that you could do that. Not sure though, so wait and see what others say. Also, if internet activation ever gives you problems, calling in to the computer often solves it. If that doesn't work, normally the MS rep will cut you slack.
Yes, you can reformat. Under Vista, I progressively
(a) restored a drive image of the OS to a new HD. This required manual activation through Microsoft. When I did that, I asked what would happen if/when I took my next steps to resolve the issues I was having. They said "NP".
(b) I then replaced the motherboard, This again required manual activation that went without a hitch, as they promised.
If you have the actual OS disk, you will have no problems with a simple reformat or more.
If you have a "restore disk" from the PC vendor, you may have problems doing more than a simple reformat.