I've been a PC gamer since I got a commodore 64 instead of a NES (I'm really glad about that too) and I've seen all kinds of silly methods to protect software. Originally starting as games that wouldn't copy correctly off a diskette, then to having to type in words from manuals, later funny code wheels from Lucas arts, with the advent of CD roms they started checking the discs, eventually we got keycodes, and now we have crap like this.
None of that stuff ever stopped a determined pirate, piracy of software has been happening since Bill Gates was calling most of the people using his basic interpreter thieves. I do not condone piracy, I believe that if a game company creates a good game they deserve to be paid for it. But here is my arguement for why piracy happens.
So Software (game) prices have been sitting around $50+ a title since I can remember, software companies use the excuse that they have to keep the prices high to because of piracy. I call BS, since if they would lower the price many people like me inclined to purchase more games. Simply put, often game companies want to see a quick turn around of profit on their games but many of them don't understand that if they make a truly epic game, it possibly could live on forever and be ported to new game systems and OS for decades. Charge less for a game, and more people will buy it. Make better games, and you will be able to keep profiting off of it for many years.
Crappy games drive up piracy and directly cause it to happen. Have you ever bought a game that was so crap-tacular that it was uninstalled in less than a weeks time? Last title I bought that was like that was Defender of the Crown 2, (The old school gamer in me wanted it to be good very badly) but in the end it was very unplayable. The problem is by the time you've figured out how crappy a game is you've already installed it meaning that it is not possible to return it to get your cash back. Now if I had of downloaded Defender of the crown 2 first and played it before buying it, I would of known not to waste my money on it. Many people who pirate game are folks who have been burned by crap-tacular games one too many times.
Software piracy doesn't exactly mean a lost sale! There are many aspects of this. Many games that might not have a playable demo, are a risky perchase as mentioned above. If the game is good, the pirate possibly might end up buying the game after the act of downloading it, same can be said with music and movies. Then you have folks who wouldn't of bought the game no matter what, and would of enjoyed the game if piracy didn't exist. Then you have the people who simply pirate everything and anything as a collecting hobby and seldom even play have of what they pirated more than 15 minutes just to simply check to make sure their copy works.
Now you have this current gen of DRM crap. This type of action by companies is akin a spoiled child who doesn't like who he got teamed with and decides to take his ball and leave. When you get so paranoid about piracy that it begins to stop your customers who have given you their hard earned money from using your software you've got issues. If you don't trust your customers enough that you require the program to call home every time it is run, you've got issue (STEAM). If you feel that you have to install a rootkit onto your customer's system to ensure it doesn't get pirated, you've got issue. What are these issues? Not trusting your customers. You know what? If you don't want to trust a me after I've bought your product, I'm simply not going to buy it. There are plenty of game companies that treat there customers better than that, so what if I'm not going to have experienced the latest Valve release? Beyond paying for a game, there are many open source alternatives to excrement being plopped onto the shelves these days. Warsaw is the best example.
In the end, I'm gonna say that piracy isn't anything new, isn't going away, and trying to battle too hard against it will alienate your paying customers and hurt your business. Instead of fighting piracy, companies should try to live with it the best they can, and give incentives to people to purchase their games instead of penalizing them with DRM and other copy protections.