To set up a KMS server, you need to have a valid volume license for Microsoft products and a server running a compatible version of Windows Server. Here are the general steps: 1. Install the Volume Activation Services role on the server. 2. Obtain the KMS host key from Microsoft. 3. Activate the KMS host using the provided key. 4. Configure the necessary firewall settings to allow communication between the KMS host and client machines. 5. Set the DNS records to enable clients to discover the KMS server automatically. 6. Finally, install the necessary Microsoft products on client machines and ensure they are configured to connect to the KMS host for activation.