how does drm and such work.....?

i was watching a video of the bioshock drm issue that has been arising around the world. go to tomshardware.com to see what it's all about. but my question is, how would the disc know that i have installed it a certain amount of time on a computer [like what microsoft did with vista, you could install only in one computer and that was it] or that the cd know's that i have installed it in several computers [the situation with bioshock, you limited to 2-3 installs on a computer].i thought cd's were only readable and not rewritable, in the sense that game companies don't often use cd-rw or something like that.so how does it know that i have installed on my computer and when i try to install it again that it knew that it has been installed once before?

CDs are indeed only readable. A normal CD cannot store additional data after being burned.I think after you install a game like bioshock you have to register/ 'activate' it online in order to play it. That is the idea of drm. The ones that hold the rights to the digital content manage your usage of that content.