This is a very general question, and the answer will differ depending on the application interface you're using.
Generally:
- Content is encrypted. You need a "key" to unlock it.
- The "key" is attained by synchronizing the local profile with a master server.
- Typical authentication methods are used to login to the master server.
- All communication to the master server is typically over SSL/encrypted channels.
- Your profile on the master server will contain all the purchases you have performed, and this is used to generate keys to unlock encrypted content.
- Keys can be revoked by the master server if necessary.
Its also likely that all content, including free content, is encrypted, and requires a key from the master server to unlock and use/execute. This is all pretty standard authentication/DRM type mechanics.