The full retail version is for somebody who wants to install Windows 7, but they currently do not have a copy of XP or Vista already installed on the computer. The upgrade version is for people who DO have a copy of XP or Vista and just want to move to Windows 7.
Retail indicates that's its a retail license and can be used on 1 computer at a time, but can be moved from one computer to another...as long as it's removed from the first computer. The opposite of retail is an OEM license that is tied to 1 and only one computer forever. Once you install on one computer, you cannot move it to another computer. You would have to buy a second license for the other computer.
Hope that helps clear it up.