The difference between a Windows 7 Retail and a Windows 7 Upgrade license is for you to qualify for an Upgrade license, the system you are looking to upgrade needs to already be licensed to an OEM or Retail license of either Windows XP or Windows Vista. Then, once you have upgraded, depending on weather you used an OEM or a Retail license of either Windows XP or Windows Vista as the qualifying product for the upgrade, the same licensing restrictions will then apply to Windows 7 too. You also won't be able to use the qualifying product that you used for the upgrade once you have upgraded to Windows 7. Though, you are perfectly entitled to move an Upgrade license from one system to another providing you first remove it from the original system and you also follow the terms above.
Where as a Retail license, you can install it on a system which hasn't already been licensed to a previous version of Windows. It can also be moved from one system to another providing you first remove it from the original, just like an Upgrade license. However, a Retail license is slightly more expensive than an Upgrade license but then you do get more flexibility with it.
