http://developer.android.com/guide/publ ... nsing.html
Android Market offers a licensing service that lets you enforce licensing policies for paid applications that you publish through Android Market. With Android Market Licensing, your applications can query Android Market at run time to obtain their licensing status for the current user, then allow or disallow further use as appropriate.
You basically just install a google library and query the market to see if the application is a legit install
It's good because it gives you the option to revert to an 'unlicensed' version or allow it to be used for a certain time before enforcing the license.
You can also vary how often it checks for the license so as to not annoy your faithful users to much!
Hopefully the simple tut for integration will be up here soon looking at you plusminus