Password Protecting External EXE Files?

I have a question about programs that password EXE files on the users PC. I actually wanted to know how these work, the ones that allow the passworded EXE to run on a PC without the software installed.

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Do they add something in the program, or do they somehow replace it with a program that runs the exe in memory?

Now, I wanted to know how this could be done in C#, is it even possible? I would like to be able to create authentication of my own for the programs on my computer(I assume some would be in C++, some in DotNet and what ever other languages popular games/programs are created with).

Thanks to anyone who can answer/help me :)

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A way I have found very good is a HWID protection where you have an database online with allowed HWID's then it checks if your HWID is allowed to run this program