Not so, but close

Windows will know SN and PC you are on. So if they detect one SN from a "significant different PC configuration" they will remind you to active again. The trick is you can only active one PC at any time. If you put it on your PC, the other PC will not be usable.

So yes, you can active and work on your PC, and yes, you friend will loss his XP. Of course if you don't care about him ... just use it! :)