One would think the software industry / computer games industry has learned something from the fates of the music and film industries. When their sales declined they put DRM into their products. When that didn't help they made the DRM systems more draconian. And, unsurprisingly, the customers hated it and their sales declined faster. But the software industry / computer games industry seems to be unable to understand this lesson.
But DRM that makes your game suck whenever your internet connection is flakey - that's going to make paying customers very angry, very quickly. It's a terrible idea.
Office, and plenty of other desktop software will nag you relentlessly until you "Activate your copy online".
This is especially annoying for people like me, who spend months at a time off in the sticks where there may be occasional generator power but there certainly is no internet.
Just a few weeks ago, I "activated" my copy of CodeSmith with 5 days to spare (out of 30). If I had had to make a special trip to a city just to do it (which from the pacific coast of Colombia would have required a flight), I would have been pretty upset with that company.
However, it's important to always remember that a pirated copy doesn't equal a lost sale. Many people download a game, but never install it or play it. Others download and play it, but if they couldn't have downloaded it, they would never have played it. And finally, there's a percentage of downloaders that would have bought it if they hadn't gotten a pirated version first.
It will be interesting if this experiment by Ubisoft can determine how large that percentage is. It's definitely not 100%, and it's definitely not 0%. I would guess that it's a single-digit percentage of the people that would normally pirate a game that could go and buy it instead.
However, this new DRM is so vile, that they will also lose sales on it, and I wonder if the sales they gain from delaying the pirating of it is larger than the sales they lose from having a horrible DRM.
http://www.joystiq.com/2008/11/13/world-of-goo-has-90-piracy...
Lastly, there is also the (likely small) category of those who pirate and later buy the game once the price comes down. Many games drop to $5-$10 on Steam after a year or two, which is rather enticing even to a pirate.