In windows, when ever you install a new software you need to activate it with Microsoft over the internet. In a large network doing that is a hard work. Most of the time large organizations use 'Volume License' when they purchase Microsoft products. Then managing those volume license is another problem. We can use this Key Management Service to handle this problem.
First of all you need to get the KMS key from your "Microsoft Volume License Service Center". Assume that we are going to install KMS in a windows server 2008 R2 which is almost in the domain and logged in as a domain administrator. (If not, you need to add a DNS entry to the DNS server manually) Then you need to locate the KMS key "Windows Server 2008 Std/Ent KMS B".
Then log in to that server and try to change the product key to this KMS B key by doing this.
Right click on "My Computer" -> Properties. Click on 'Change Product Key" link. It will open another window. You can add the "KMS B" key in to that and continue it.It will give a warning saying that "You have entered a Key Management Service Key ... ". Click on OK on that.
Then you need to open the KMS port on the local firewall to the domain.To do that, open the windows firewall and select "Allow programs to communicate through windows firewall" and set the "Key Management Service" tick. Then press OK button to save the changed settings.
Now you have almost install the KMS. To verify the installation we can type;
nslookup -type=srv _vlmcs._tcp
in a client machine. If it gives the correct IP/domain address of the KMS installation system you have successfully install the key management service for your network.
Now you can use these (http://technet.microsoft.com/en-us/library/ff793421.aspx) KMS dummy keys to active other clients using this installed KMS service.
Note: You have to have at least the minimum number of computers of virtual instances to use this service. We can get those activation thresholds details from: http://technet.microsoft.com/en-us/library/ff793434.aspx