Come on man, you know the rules. That said, here's my best explanation about the technical facts:
Copy Protection: Virtually all games implement copy protection by doing CD checks. In modern times, "CD's" are actually physically altered at the manufacturing plant so that they're not perfect, and then a scan is done by the game to find those imperfections. They can't be replicated on a CD-R, since CD-Rs are perfect.
Alcohol 120: A disc ripping/burning/virtual-drive program that specializes in dealing with copy protected discs. It can read these imperfections and the Alcohol team tries to devise ways to simulate these on CD-R's or via a virtual drive.
Virtual Drive: Basically a fake CD/DVD drive that actually reads a file on a hard drive and supplies that data to Windows in the form of what it believes is a CD/DVD. Very handy for when you want to easily backup things and run them later as if they were on a CD.
Blacklists: Because virtual drives are so powerful, copy protection mechanisms "blacklist" virtual drives and abort the game if it detects a virtual drive.
Anti-****: So the next step is to hide the fact that the virtual drive is a virtual drive, so that copy protection mechanisms think they're seeing a real CD. It's a constant war between this technology and copy protection mechanisms for the most part, since new mechanisms will figure out how to spot anti-**** and virtual drives hidden by it.