Licensing is the new way of doing Android Market copy protection. It requires the device to have the Android Market app, and the app must be associated to a Google account. The app that is licensed must be a paid app; free applications are considered licensed to all users. A down side is that many devices that are not licensed to use the official Google android apps won't be compatible with the licensing code. http://developer.android.com/guide/publishing/licensing.html
In-app purchases are also tied to Android Market. Here you are still locked down to the official Android Market app, but your application does not need to be a paid one, according to http://developer.android.com/guide/market/billing/billing_overview.html#billing-limitations. This is cool in that you can release an application for free, then charge for extra content.