Disclaimer: I am being intentionally vague when describing these mechanisms. This is for educational purposes only.
This page is informational in nature and provides no means of circumventing the Sony provided copyright protection.
Blue and Red
There are two colors of memory sticks, blue and red.
Physically the two sticks are the same (other than the plastic color). The only difference is a hidden block of data stored on the red memory stick.
There are (currently) 3 kinds of red memory sticks: W01 (AiboLife), W02 (Hello AIBO) and W03 (Party Mascot).
Each of these sticks has a special magic code written on the stick.
This magic code is NOT copied when you make a backup of the stick.
To restore the W01 software, you must have a W01 stick.
To restore the W02 software, you must have a W02 stick.
To restore the W03 software, you must have a W03 stick.
If you have a mis-match, say copying W03 software to a W01 stick -- the resulting stick will not work in AIBO (it will fail to boot).
What's the magic
The magic code isn't really that magic. It is a 1024 byte data block that is stored in a normally inaccessable part of the memory stick.
The 1KB magic code is stored in the first two pages of block #2 which is normally reserved.
For more information on the details of the memory stick protocol, check out the website http://www.memorystick.org.
It is possible to build your own memory stick reader to access the memory stick directly. This allows you to turn a blue memory stick into any one of the 3 different "red" memory stick (paint not included).
What is the magic code, and how do I write it myself?
Don't ask me. Although there are many legal uses, it also can lead to piracy.
Please buy more AiboWare sticks from Sony. They need to be convinced that there is a market for selling add-on products!