"Social DRM" or "Watermarking" works by taking the information your customers provide when they purchase your book and embedding the info into the book itself. That information includes Name, Email, and Phone Number. Since the information is pulled from the payment information, it is more reliable than voluntarily given information.
As most individuals will not readily share their personal information with strangers, they are discouraged from sharing the book inappropriately.
The advantage of Social DRM is its broad compatibility with virtually all readers without the need for special IDs or specialized eReader software.