What is DRM and why is it an important feature?

I'm thinking of upgrading to Windows 7 but the salesman at a local electronics store confused me as he told me about the different editions and said that I NEED to upgrade from Windows XP because XP lacks DRM and according to him, my computer will be unable to play DVDs, Blu-Ray Discs, and any high definition movies. I asked a couple of friends about DRM and they were against it (one even discontinued using Windows and uses only Linux because he says Apple also has DRM). Their claims is that it is basically spyware that will be used by the RIAA, MPAA and others to keep tabs on your movies, songs, and other digital media which concerned me since I don't want anyone collecting information from my computer without my permission and already dislike the Windows Genuine (whatever it's called) that makes sure we have a legitimate copy of windows and one time incorrectly identified my legal copy of Windows XP as a pirated copy. What happens if DRM misidentifies a song, movie, or other content you legally own as pirated copies? Will I be able to backup songs, movies, and digital content without it flagging machine. Is what my friends explain about DRM accurate? They also claim that DRM ruins the playback of songs and movies. I'm lost, what is DRM and why is it such a great feature of Windows 7 (along with Windows Vista and Apple computers)? Why is Linux refusing to embrace this feature if their users won't be able to play CD's, DVD's, Blu-Ray Discs, etc? I've never heard of DRM until the salesman mentioned that Windows 7 has it and most hardware and CPU's have DRM support built in and he claims my current computer won't work any longer with digital media and my friends knew about DRM and were opposed to it.