Sirrus, that's not demo mode.
I think there's also a server timeout if it takes too long. It's happened to me at least one time that I can think of that I didn't change anything that would cause problems and it took a while to authenticate my key and it finally just said "offline mode"
Why should anyone have your key anyway? To get the same ID, they must have your key, and so you're sharing a key? Badspot will not approve.
http://blockland.us/index.asp?p=faq#f