[devicenull]

He sends the user's steamid (a unique identifier of the account) back to one of his servers. Presumably, that server compares it to a list of people who have purchased the game. There's very little little chance of a false positive. The check will not crash the game if the server is unreachable (which the pirates have already discovered), so it won't turn into your usual "DRM servers are down, can't play my games!" issue.

[markszcz]

Thanks! I was going to ask for a link to how you know this but it makes total sense. I was already thinking if that was the case or if something else was being done but going back to the servers is the most logical explanation. What personal computer isnt hooked up to the internet these days. The game must have come from somewhere, most likely the internet and not someone’s floppy disk/zip drive/usb stick.

[devicenull]

I was checking some fairly well known pirate forums to see how long the protection had lasted, and they talked about how it worked. It lasted for about 3 hours after he posted the cause of the error.. probably would have lasted longer if he hadn't done that.