When discussing computers (and electronic equipment) OEM usually stands for 'Original Equipment Manufacturer'. Although this should refer to the companies which originally manufactured the components a PC is made up from (e.g. processor, memory, HDD, etc.), it has also been (misleadingly) applied to the value-added resellers (VARs) who assemble these components into more complete systems1.
Computer components and equipment which are labelled as 'OEM' are typically intended to be used by VARs. They will normally differ from the retail versions of the same product in a number of ways:-
- The packaging will be plain (often just a cardboard box with a small label).
- They will include few, if any extras. For example, an OEM hard drive will typically not include screws or brackets, separate instructions, nor spare jumpers; a DVD drive might not include DVD playback software, and the OEM Pentium 4s do not include the fan and heatsink included with the (intended for) retail version.
- The warranty may be very limited2.
However, the OEM versions can also be significantly cheaper, and may be a good choice for the home user who doesn't want to pay extra for accessories which they already have (or don't need). It goes without saying that if you are in any serious doubt, you should consider what will (or will not) be included, compare prices and decide accordingly.
OEM can also stand for Open-Ended Merger.
Thank you to xdc for including 'open-ended merger' in his/her original writeup.
1The 'system' in question may be a complete PC. However, it could also refer to (e.g.) a business 'system', made up of one or more generic PCs customised by another VAR; in such cases, the PCs themselves could be considered as the 'components'.
2I'm unclear as to the legal position of limited guarantees on OEM components when sold through retail channels to consumers in countries with strict consumer-protection laws (e.g. the UK).