What it does is take the source code and encodes it in a manner that makes it unreadable to humans. The code can then be safely distributed with your intellectual property intact. One of the applications that can be used to obfuscate and license your code is a combination of products called Iono and PHP Encoder by IonCube.

They look at the setup of the application, some of the requirements you'll need to get it working and a quick description of how it works (a "shopping cart" for users to purchase license for your software). The integration of the application into your files (the other half of the equation) can be done with one of five different kinds of licenses (including per page and a local license covering all files).

To start, I will focus on the paragraph above. What I get out of that is that if only your source was closed and hidden from prying eyes, it would not have bugs in it. Which is, of course, total nonsense. Code has bugs because it's open and they feel safer? There are two kinds of bugs: application bugs (which is the code I would write) and system bugs (in this case, bugs that that appear from PHP itself). I'm sorry, but there is nothing I can do if there is a bug in PHP that causes my application to crash except to point this bug out to the people who have the ability to fix it.

He goes on to talk more about how protection like this (the article talks about using the IonCube Encoder) will not stop someone if they're really determine to get at the code underneath the encryption. His only suggestion is to make an application good enough that people wouldn't want to try to steal it as much and would rather pay for their version.

Encode your stuff if you want, but be aware that the minute you choose to do that you are telling your customers "I don't trust you" and I have a hard time understanding a business model that assumes people are going to want to steal the stuff you sell.

This year, a further 5% discount is being offered on our ionCube Encoder & PHPAudit bundles, with prices starting at just $223.24 for a complete encoding, licensing & distribution package - saving over $75 on the usual separate selling price. Standalone PHPAudit Perpetual licenses are also reduced by 20%, starting from $79.99.

If you'd like to try out one of their products to see the great quality, you can download a "lite" version of PHPAudit and give it a shot.