Digital culture influences identity formation in three main ways: 1) Through identification, where people associate with social groups and label themselves and others. 2) By allowing for fragmented identities through tools like avatars, where people can express different parts of themselves. 3) By exposing people constantly to media and surveillance, which can lead to conditions like the "Truman Syndrome" where people believe their lives are being filmed for reality TV. As digital culture continues to evolve, it will continue reshaping concepts of identity.