Apparently Microsoft has implemented a Genuine Software checker into Windows Phone 7. It uses PVK, defined as private keys that connect the OS to the device hardware. The keys sit on the device motherboard, and are accessed and verified by Windows Phone 7. If the keys cannot be found, then the OS concludes that the motherboard needs to be replaced and shuts down key cloud-based elements like Xbox Live, Marketplace and Zune.
The feature has been verified by HTC so it is official. The question is why Microsoft bothered risking the bad publicity. As with Windows Genuine Advantage, it's only a matter of time before someone finds a way around it. It will only stop a small number of people who want customised Windows Phone 7 ROMs.