Probably by cookie-ing or fingerprinting your device, and then tying that to IP geolocation. They don't need to get close to 100% accuracy and they can do things to err on the lenient side. It doesn't seem that hard a problem compared to other anti-fraud systems I've seen. I think it'll probably work fine.
That’s exactly what Hulu started doing. You have a “home location” and if someone logs in from far enough away to trigger their systems, they’ll have them set that location as your new home. You’re only allowed 4 of those changes per year without calling some support line so it seems pretty effective.
How does that work for Hotels or if you regularly travel between two locations?
For Netflix, you get a travel pass. But, more importantly: the allow condition is probably disjunctive: trusted device OR trusted location. If you're just watching on your laptop or iPad, you're probably fine no matter where you are.
a nerd: I always bring NUC and streaming stick to hotel!
Or watching anywhere out of the house on mobile data. Does that not count?