Well they do have limitations.. can't play it on more than 3 devices at a time, can't burn a playlist more than 10 times without changing the playlist.. etc. But it's unclear as to whether the control mechanism is just iTunes, or if it is built into the file format somehow.

Primarily they are selecting a new format in order to control it better and sell more Apple hardware. Many current mp3 devices become obsolete today unless they can be upgraded. I haven't seen any analysis of the Apple AAC yet to determine what kind of DRM might be used, but I'll be anxiously awaiting an AAC -> MP3 converter with minimal loss of sound quality.

This was a brilliant move on Apple's part.
-Hoagy.