Silverlight's DRM is based on Microsoft's PlayReady technology, which was originally developed for mobile devices as a competitor to OMA DRM 2.0.  Microsoft has adapted a subset of PlayReady functionality for Silverlight; in fact the official name is the rather long-winded "Silverlight DRM powered by PlayReady."  Microsoft is positioning Silverlight DRM as one of several content protection technologies that Silverlight 2 will support, including user authentication and stream encryption.

Silverlight DRM works with Windows Media Audio and Video content.  It is designed specifically to support media consumption models in which the user's PC is connected to the Internet, including streaming and progressive download.  PlayReady uses a different encryption scheme than Windows Media DRM, but the Silverlight DRM client will support content packaged with Windows Media DRM 10.

Microsoft is positioning the entire Silverlight platform against Adobe's combination of AIR (Adobe Integrated Runtime), Flash video, AMP (Adobe Media Player), and Flash Media Rights Management Server; the latter was released a month ago. In fact, Silverlight is a very aggressive, rifle-shot competitive response that Microsoft has launched at Adobe, compared to previous matchups such as Microsoft Publisher vs. Adobe PageMaker for desktop publishing.  Microsoft must surely be concerned with the massive popularity of Flash as a web streaming video format -- on YouTube, for example -- and its implications for platform ownership.

Silverlight DRM vs. Flash Media Rights Management Server isn't really a fair comparison, however.  Adobe's DRM is meant to handle downloaded files and offline uses, which reflects its basis in Adobe's LiveCycle Policy Server, a rights management technology for corporate documents; Adobe also offers RTMPE for streaming encryption.  Silverlight DRM appears to be complementary to standard Windows Media DRM and to be applicable in usage situations that are more likely to come up in Silverlight applications, which imply connected users. 

It's not yet clear whether either (much less both) of these rich media web application platforms will take off in the market.  Unlike Microsoft Publisher and PageMaker, they aren't applications; they require developers to turn them into applications.  Microsoft has long experience in rolling out platforms for software developers, while Adobe's legacy lies with designers and other creative professionals.  Both designers and developers will need to find these platforms more attractive than their existing tools in creating web applications.

Widevine also announced a DRM technology for Silverlight, which has additional functionality to protect against screen-scraping and stream-capture software on the client side.  Just as Adobe has done for the PDF format, Microsoft has purposely architected Silverlight to work with third-party DRMs.  For those who wish to hedge their bets in this Microsoft-Adobe platform battle, Widevine's server-side technology also supports Flash video (among other formats).  Widevine demoed its Silverlight DRM at NAB and, like Microsoft, has not announced an official release date.