Serial Key Generators For Mount & Blade What Is A Key Generator And How Does It Work?

What is a key generator and how does it work? - serial key generators for mount & blade

From what I understand typw a serial number and provides a Keygenerator algorythim in defining forget one? Am I right? If this is how it works, why not just software vendors assign security codes random serial numbers and keep them in the registry so that no manufacturer than what?