In the preview program for the new dashboard update to the Xbox 360, Microsoft has explained the DRM policy for their upcoming Games on Demand service.

“Games on Demand titles follow the same licensing rights as all other forms of downloadable content. Users are granted a user license that will allow the purchasing Gamertag to play the game on any console, and a console license that will allow anyone to play on the console that the content was originally downloaded to. No physical disc is required to play these games,” a statement on the Xbox 360 console read.

If you have access to the preview program, scroll to the “Xbox Preview” tab, go to “New Features”, “Games on Demand” and “Digital Rights Management (DRM)” to read for yourself.

The policy seems reasonable enough — it has worked on Xbox Live Arcade games just fine and without too many headaches, so it should work the same with Games on Demand.