It seems that there is a sequence of events that happens when you leave Windows 7 inactivated. First, you get tooltips in the tray that say "This copy of Windows is not genuine, click here to activate now."
If you ignore the warnings, eventually you get a watermark on your desktop:

Then, after another few days, Microsoft tries to make you afraid of the dark by turning the desktop background to solid black:

Eventually another tool tip will say "Activation period has expired, click here to activate now."
I know that to prevent all these things from happening, I should just activate. But my question is merely one of curiosity:
Is there anything further that Windows 7 does to try to convince you to activate? Do certain services get shut down or functionality lost? What can I expect to happen if I don't activate?