This is a software upgrade (though some may disagree). But could it also be a license downgrade?
At the moment, my installation of Windows 7 has a "retail" license. This sort of license is transferable between PCs. If some of my PC hardware fails, I can install new components to fix my PC, and the license can be reused. I needed to use this feature last week when my PC motherboard failed. I installed a new motherboard, reactivated Windows 7, and continued as before. If I'd bought a cheaper Windows license - an "OEM" copy - this would not have worked.
Question 1: If I upgrade to Windows 10, is the license still transferable to a new PC?
It turns out that the answer is yes.
I found a discussion here on Microsoft.com. It is full of questions that aren't really related to licensing, and frustratingly irrelevant replies from Microsoft employees, but I did find the answer I wanted from an "MVP":
When I upgrade a preinstalled (OEM) or retailversion of Windows 7 or Windows 8/8.1 license to Windows 10, does that license remain OEM or become a retail license?So, upgrading to Windows 10 does not involve a license downgrade. Once upgraded, the copy of Windows 10 is transferable, if it was transferable to begin with.
If you upgrade from a OEM or retail version of Windows 7 or Windows 8/8.1 to the free Windows 10 upgrade this summer, the license is consumed into it. Because the free upgrade is derived from the base qualifying license, Windows 10 will carry that licensing too.
If you upgrade from a retail version, it carries the rights of a retail version.
If you upgrade from a OEM version, it carries the rights of a OEM version.
Question 2: How do I know if my Windows license is transferable to a new PC?
I found an answer here. You can tell by looking at the System page in the Control Panel. At the bottom of the page, you see a "Product ID". If this contains the letters "OEM", your license is not transferable, because it's an OEM copy rather than a retail copy. OEM licenses are locked to one PC.