Activate your XO
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First, install/upgrade the build
The first thing you should do is make sure your XO is running an appropriate build.
For instance, to upgrade to build 656 on an unactivated machine, download:
http://download.laptop.org/xo-1/os/official/656/jffs2/fs.zip
and
http://download.laptop.org/xo-1/os/official/656/jffs2/os656.img
and put the two files 'fs.zip' and 'os656.img' in the root directory of the key. Insert the key. Hold down all four gamepad buttons (X, O, square, and check) and power on. If you don't see the breakout game, then you might not be holding down all four buttons. Later firmware does a better job of providing feedback here, you might have had old firmware before the upgrade.
This should give you a clean install of 656 on an unactivated machine.
Better still is to use an appropriate Customization key for your country. Insert the key and power on with the four gamepad keys held down; this will reflash as before and then install appropriate content and activities for your country.
Now, activate the machine
When your upgraded but unactivated machine boots it will go to the activation screen and try to find an activation lease from a school server or USB key, and not find one.
Activation and Developer Keys#Getting devkey data via USB stick describes how to use an activation/developer key to collect the serial number and UUID from the laptop and put it in a laptops.dat file. If you've got an account on the activation server, you can then upload that laptops.dat file to
https://activation.laptop.org/request/create/
to generate a lease.sig file. Put the lease.sig file in the root directory of a USB key and boot with it inserted, and it will activate (and copy the activation lease to the NAND). Note that you can not put the lease.sig file on the customization key and expect it to work; you must either use a new key for the activation lease or else temporarily rename the 'boot' directory of the customization key.
Alternatively, you can activate from a school server, but the server-side part of this is not in school server builds yet.