From Sam Costello,
Your Guide to iPod.
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Definition:

Digital Rights Management - Also known by its initials, DRM. Digital Rights Management is a technology that creates certain conditions about how some digital media files - such as audio and video - can be used and shared.

Digital Rights Management terms are generally created by the owner of the piece of digital media (for instance, a record company when the piece of media is a song). DRM is encoded in the file in an attempt to make it irremovable. The DRM then governs how the file behaves on other computers.

DRM is frequently used to prevent things like the sharing of MP3s on file-trading networks or to make sure that people buy the songs they download from the Internet.

DRM is, in some areas, an extremely controversial technology, as some people argue that it takes away rights that consumers have in the physical world. Owners of media who employ DRM argue that it is necessary to ensure that they are paid for their property.

More at Wikipedia.

Examples:

For example, iTunes uses limited Digital Rights Management in the songs that it sells. The iTunes DRM allows users to install and play songs bought at iTunes on up to 5 computers - a process referred to as authorizing. Installing and playing the song on more computers is (generally) not possible.

Some companies use more restrictive DRM, such as making downloaded songs play only while the customer subscribes to a certain music service, crippling the file and making it unplayable if they cancel the subscription.