Final answer:
Netflix detects password sharing by monitoring IP addresses, device identifiers, and account activity, looking for usage patterns inconsistent with the account holder's normal behavior.
Step-by-step explanation:
Netflix uses a variety of methods to detect whether users are sharing passwords. Primarily, the streaming service tracks the IP addresses, device identifiers, and account activity to determine if the login credentials are being used in a manner that violates their terms of use. For example, if an account is being accessed simultaneously from multiple locations that are far apart, it may trigger a review for potential password sharing. Additionally, the use of the account on too many devices can also be a red flag. Netflix may also analyze patterns in viewing habits to discern irregularities that might suggest the password has been shared. If Netflix determines that an account is being shared, they may issue a warning or require additional verification before continuing to provide service.