Eons ago, I wrote about RipDigital, a service that extracts all your CDs to digital audio for you. You send them your CDs, they do the ripping, and they send the CDs back plus DVDs with the MP3s. At the time, I bemoaned the time I had wasted ripping my CDs, when I could have paid RipDigital US $129 to do 100 CDs. Then I read this paragraph of Gizmodo’s review:
Another policy I can’t fault them for (but which is the topic of hot debate among my friends ever since I began this review) is RipDigital’s policy of putting a digital watermark on every MP3. The reason for this of course is so that you don’t rip a gang of discs and then offer them up on BitTorrent or Usenet, thus cheating thousands of
music label execsartists out of money that would be used to buydrugs, yachtsformula for their starving infants.
That’s too bad, because I was sold on this company up to that point. Ah well, soon enough some company will emerge in Ecuador or India or Thailand that will do this without the DRM.
DarrenBarefoot.com 
Slim Devices — makers of the SqueezeBox digital music player for stereo’s — is also offering this service at the same rates. They seem to offer a wide variety of formats, but they don’t mention watermarking on their site.
http://www.slimdevices.com/pi_ripping.html
http://www.darrenbarefoot.com/archives/000686.html
It doesn’t sound, at first glance, like they’re actually DRMing the files. They’re still MP3s (or other formats, including the open-source Ogg Vorbis, if you want), and should play on anything. But what the watermark likely does do is make the file identifiable to its source, like the chemical composition of petroleum from a certain oilfield (to cite one similar example), or diamonds from a certain deposit.
In those examples, you can still make gasoline and engagement rings just fine using any technique you want, but if someone wants to figure out whether the oil was from Iraq or the diamonds from Sierra Leone, they might be able to. Similarly, you can play your MP3s (or Oggs) on any device that supports the format, and rip/mix/burn to your heart’s content, but if the files end up on Kazaa or BitTorrent, someone might be able to track you down. Still not pleasant, but not DRM in the strict sense.
It would be interesting to know what kind of watermarking it is. Their FAQ isn’t too forthcoming: “RipDigital writes a ‘unique identifying mark’ to each file that identifies every track as your own. The mark written to the file does not degrade the sound quality of your music. RipDigital is committed to copyright protection and works actively to protect the rights of artists and music labels.”
If it’s just a custom ID3 tag, that’s easy to remove. If it’s something else, I wonder if it works consistently with other formats such as Ogg, and whether it really doesn’t affect sound quality at all.