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You have the mechanism absolutely right; in order for someone else with a Reader to read your book they'd need to unregister the Reader from their account, and register it to yours.
It's somewhat easier with Mobi DRM than with the Sony. With Mobi, your friend needs to tell you the ID of their device, and you can encode a book that you've bought for their device and then give them the book. You can do that for up to 4 devices.
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