As for checking it when you install, well surely that's DRM? Which is being adopted more and more these days, with games "phoning home" during install.
I think this has come about because when CD key validation first started off (late 90s with games like Halflife), internet connections were much less common, many of which were dialup accounts. At that time it was pretty rare for home users to have an 'always on' internet connection so validating cd key during install would have caused many users problems.
Obviously 10 years later we now have a situation where the vast majority of pc gamers have a broadband internet connection, it's just taking a bit of time for these kind of DRM checks to take off.
Of course, what it means is that crackers now have to focus on cracking/spoofing the DRM validation checks rather than the more traditional cd/dvd checking and keygens. Games like Bioshock also have stuff where not all the game content is on the retail dvd, you have to validate and then download extra bits. I think that publishers know that ultimately their games will get cracked, but their goal is to delay that long enough that it doesn't usurp the retail release. Or in other words, they want their games available to buy before they hit the scene, which makes a lot of sense especially for AAA titles, as it makes it more likely for people desperate to get their hands on the game to buy it, rather than downloading it.
Following on from the above, this is one reason why I think online distribution systems will start taking over - with no requirement to "Go Gold" or anything like that (sending out a master to dvd fab plants), there is much, much less chance of the game getting leaked prior to the official release, as it's locked away on a server somewhere. Effectively this makes 0-day and especially pre-release piracy more difficult. Of course this in itself can cause problems in terms of the huge amount of bandwidth required on release day, which is why we have seen Valve go down the 'preload' route with Steam, to spread the demand over a longer period of time.