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How does Activation Lock work?

When you enable Find My iPhone on your iPhone, iPad, or iPod touch running iOS 7, the Apple ID and password you use for iCloud is securely stored on Apple’s activation servers and linked to your device. From that point on, your password will be required before anyone can turn off Find My iPhone on your device, erase your device, or reactivate and use your device.
 

Activation Lock is enabled automatically when you turn on Find My iPhone in iOS 7, or when you upgrade to iOS 7 from a previous version of iOS that has Find My iPhone already turned on.

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