Recovery Media has not been shipped with new systems in almost a decade now. At best there is a Recovery partition that consumer can use to create Recovery Disk themselves before the system fails. Obtaining Recovery Media from places like Dell and Lenovo is a Pain in the ass unless you are the original purchaser of the system of an official retailer and you only want 1 Copy of the Media.

The problem is most systems of value sent to a recylers are from off lease buys and corporate refreshes, Most IT shops I know of do not bother getting, storing or collecting Restore disks because we are VL (Volume Licensed) and do not use the OEM image at all even though we pay for it. The first thing that is done on a corp device of any company that has more than 10 or 15 systems is to wipe the entire factory disk and install our own customize version of windows. We also tend to toss any Documentation, CD's and other items that were to come with the system in the trash

So Recylers get thousands of systems annually that are perfectly serviceable, fully licensed with windows but they can not use that license because there is no restore CD and they have no way to obtain one. Thus MS does them a "favor" buy selling them a new license for $25 instead of just providing a way for them to restore the system

It's not that weird, software uses physical totems for all sorts of policy decisions. Look at the weird complicated nature of discs in videogame consoles this decade, for instance, (and which PCs did for a couple decades before). The game software is often running entirely from a hard disk, but if you bought the game as a physical disc (Blu-Ray), the console still wants the disc in the drive for a proof of continued ownership. (All to appease the pawn shop habits of many videogame players.)

It's all just variations on Two-Factor Authentication. Proper two factor is using a hardware device you own to be a physical totem as a factor to access an account.

Here Microsoft is saying that a proper license of the software for a given machine is both the license code (something you know) and a physical disc (something you have) as a simple two-factor equation.

Microsoft giving the benefit of the doubt to the average user that perhaps they might lose a disc for boring reasons like "It's in a box somewhere in the attic, I just don't know which one" or "I tossed it in the garbage not realizing it was valuable" or "My dog thought it was a Frisbee" (and these days even and especially "I didn't realize I needed that partition when I repaved my idiot OEM's install"), offers the rough equivalent to the SMS two-factor password recovery on their website (by interacting directly with them, and presumably only them, to download an "emergency" copy). Just like SMS recovery, it's not a great 2FA replacement, and is likely to have false positives from bad actors, but it is better than nothing.

So it makes sense that Microsoft would have problems with disintermediating that exchange, because A) they can't track it, and B) as it scales, it increases the likelihood of bad actors abusing it. Even if this particular recycler wasn't collecting and reselling the proper copies of recovery discs alongside the counterfeits, the next one might.

Returning to the 2FA analogy, there are somewhat equivalents to the "Forgot Password" flow for a system to remember its old License Code, both in the system itself and on the recovery disc in some cases, not to mention that there is also the Microsoft licensing hotline where you can ask/beg/social engineer a human representative to restore your license.

So concerns that selling machines without the original recovery disc is possibly someone selling both the original recovery disc and the machine to different buyers to "split the licenses in half" is a quite valid concern, whether or not that was the actual intent here.

(...and the actual intent here is so entirely muddied by the trademark infringement and effort put into the counterfeiting, it's hard not to wonder if there was a fire beneath all the smoke.)