1) The recovery partition will let you restore your computer to the factory default state (like when you unboxed the computer). Normally, recovery is launched by tapping F11 at boot. But different brands also may have special keys, consult your brand's manual or website. Remember to backup any data you have before launching recovery.
2) The key on the sticker on your laptop is called COA key. You need to use this key only if you plan to install from a generic win7 dvd (such as a retail disk). Such an install will not have your OEM drivers, logos, bloatware etc. To activate with this key, you'll need to call MS.