It's that the signal coming from the original video tape contains a special type of noise that the TV set doesn't notice but a VCR cannot handle. It's not that the second VCR "knows" that the video signal is coming from a video tape. The way the copy protection signal works is interesting. Over 220 commercial duplication facilities around the world are equipped to supply Macrovision videocassette copy protection to rights owners." Also, "The study found that over 30% of VCR households admit to having unauthorized copies, and that the total annual revenue loss due to copying is estimated at $370,000,000 annually." So, it's a pretty big problem.
According to Macrovision, "The technology is applied to over 550 million videocassettes annually and is used by every MPAA movie studio on some or all of their videocassette releases. One popular product in this arena is made by Macrovision. Most video tapes come with a copy protection signal embedded on the tape. Most VHS tapes come with a copy protection signal embedded in the tape.
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