This is not a notification, but rather an actual update from the download website. I have auto updates turned on so when security patches, etc.. are released they will automatically download and install. This appears to be the "update" that once installed would check your machine for validation.
I just got the balloon prompt again saying "Updates are ready for your computer, click here to download updates"
If I click on the yellow shield it opens up the download window showing me the 1.0mb "Windows Genuine Advantage Notification" KB905474 (knowledg base). Below is the text for the download.
"Size: 1.0 MB
The Windows Genuine Advantage Notification tool notifies you if your copy of Windows is not genuine. If your system is found to be a non-genuine, the tool will help you obtain a licensed copy of Windows.
More information for this update can be found at
http://go.microsoft.com/fwlink/?linkid=39157fyi: the version of XP I'm running is legit.
