CNET News has posted information on how the recent iTunes DRM hack works.
How the iTunes DRM hack works
“Johansen’s program works by patching Apple’s QuickTime software with a new software component of his own. Because he called the program a “memory dumper,” programmers on message boards around the Web speculated that QTFairUse made a copy of the raw, unprotected song data from the computer’s temporary memory after it was unprotected for playback, rather than simply recording the audio stream as it played. But this was not independently verified by Apple or Johansen.”