The Xbox One will automatically authenticate a game using an encryption code built into a game's disc, when it is installed on the machine. That authentication on the console's hard drive tied to the game is then verified regularly through an internet connection.In order for this to work, each game disc would supposedly need a unique encryption key. I wonder if this is currently being done for existing game discs, and if not, then how would it affect the cost of game discs for the Xbox One. (Sources: Pando Daily, Polygon)
UPDATE 6/19/13: Microsoft just announced that the Xbox One will no longer require online check-ins every 24 hours, and that used games will work just like they work today. (Ars Technica)
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