Running Windows XP in VMWare, how should activation be handled?

Last time I did this, I do not remember having to do any activation. Now it is asking me to activate Windows XP.

Am I suppose to buy and use a real WinXP key?

What is this about a "Windows XP Mode" I'm hearing about that you can enable in VMware to activate it?

The availability of Windows XP Mode is equivalent to a free license to Windows XP operating system.

My host machine runs Win7.

My goal is to get WinXP running in VMWare the simplest way, but this activation is giving me issues (such as that WinXP doesn't seem to be sold anymore). I Googled around and found that VMWare has a xpmode.enabled = "TRUE" feature which instantly activates Windows XP (with limits, like only once), but I do not know anything about it or how to use it.