Yes it's genuine but I'm afraid your operating system isn't. You can use counterfeit copies of Windows with out problems till you use their update sevice or download any programs where Microsoft validate your operating system before allowing the update or download. 3 choices the ..
1. Pay up
2. Put up with the pop up telling you that your system isn't genuine
3. Uninstall windows and re-install windows with genuine or don't use update service with dodgy copy and don't try to download any new Microsoft stuff like IE7 and the like.
Hope this helps, been there, done that