To answer your question: Yes, you can send encrypted video with Silverlight and your customers will be able to watch it with a Silverlight player.
The whole DRM thing is explained in this Microsoft document – and obviously, it's complicated enough not to include all the details here.
Note that even in non-streaming (i.e.) offline scenarios, you can offer users licenses or other DRM schemes. This is also explained in the above document under section 3.
Now, keep in mind that you will:
- force users to use a Silverlight player, which many will not want to install
- have to implement a complicated DRM scheme
- eventually have users who can still bypass that scheme
Often, the key to success for some businesses is to not enforce DRM but rather have the users pay if they really like your product, and let the remainder share the videos – which also means free promotion.