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Basically a mini-image contains the protection (somewhat) of the original CD.
So when you mount this in Alcohol 120% it will fool the game into thinking you have your original in the drive.
This offcourse wont work 100% all the time, but there are other tools around like anti-blaxx that stop games from spotting Daemon Tools or Alcohol 120% residing in your system.
Benefits of this include..
1. No need to find a new no-cd for each patch
2. Online play if the game has it. Since most will detect a no-cd in use.
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