OEM version - With this version, your Windows 7 is tied to one PC and cannot be used on any other PC. This includes if you have to swap out your motherboard. Also, you either buy a 32-bit or 64-bit version. You don't get both like the retail versions.
Upgrade version - with this version, you must already own a previous copy of Vista or XP that has a valid, activated key. You don't have to have it installed (although that requires some "hoops" you have to go through, but they're not that bad). Do a Google search on "clean install windows 7 upgrade" and it will tell you how to do this.