tl:dr version: Hardware dongles are regularly cracked, and DRM is really only meant to protect long enough to make the sales figures desired.
The hardware USB dongles are crackable, and have been defeated frequently (Like the 3D modeling suite Maya). While having a hardware dongle with some sort of encrypted key on it is a higher barrier to piracy, it's still possible for two reasons:
1. Uncontrolled access to the dongle which contains the encryption key somewhere, and has some way of getting it.
2. Uncontrolled access to the software which may or may not implement the security features properly to take full advantage of the dongle protections. Even if it does, transfer of the encrypted key still happens during execution and can be worked around or found.
There's also another problem. Using hardware dongles for the consumer market drastically increases the attack surface of the protection, especially if a game maker is lazy and uses the same type of key and code within several games. If a pirate breaks one they can break all of them. Since reimplementing the security code for each new game isn't at all feasible, and since paying for or finding different hardware types every time is expensive, the industry isn't very likely to move there unless software DRM just isn't working well enough to keep piracy down.
This isn't to say anything about DJMax:Trilogy, however. They might have found something that works. The point of DRM, like any access control (locks, keycards, scanners, etc) is really just to prevent access for a certain amount of time. For door locks, that's long enough for security to respond. For DRM, that's long enough for retail sales to go through the normal cycle until the game is eventually pulled from the shelves, without suffering a pirate crack and the noticeable sudden drop in sales.