Hardware DRM means the keys and media decryption are handled inside a device's trusted execution environment or secure media path, isolated from the main OS and application code. It corresponds to the highest security levels - Widevine L1, PlayReady SL3000 - whereas software DRM (Widevine L3) does the work in ordinary memory.
The distinction is decisive for what you may serve: studios mandate hardware-backed protection for HD, 4K, and HDR, so a device reporting only software DRM is typically capped to standard definition. A platform must detect each device's security level at license time and tailor the resolution it offers - a core part of multi-DRM policy enforcement.
