Question about Windows XP Home upgrade

One of my friends recently bought this:

http://www.newegg.com/app/ViewProductDesc.asp?description=37-102-025&depa=6

My question is, do u have to have an OS already installed on the hdd to install xp home with that upgrade cd?

Its the same as the full version, it just asks you to put in the cd while its installing to make sure that you own a previous version.

Also, he could have gotten the full version of XP Home on newegg for $87.