deep scratches or light wispy ones. you can buy some paste stuff that you smear over the surface of cd's and its supposed to fill up cracks and scratches and make it work again, not sure if it works but i know it exists.
It looks like the CD is corupted, if you purchased this, you can call Microsoft and they'll send you a replacement disc if your lisence is valid, but if it's an illegal download you're SOL