We've been discussing this over at HTF, and I wrote a paper on the lawsuit (Huntsman v. Soderbergh) for my Entertainment Law class. What the ClearPlay machine does is it uses software filters to mute dialogue and jump over certain scenes. This is facilitated by the timcode embedded in each DVD you buy. The filters in the player are customisable to various levels of intensity, and there are levels for language, violence, nudity, crude dialogue, and the like. You also have the option of never turning the filters on. This is a hot button topic that has a lot of people screaming censorship, but it really isn't if you stop and think about it. First, the DVD is never physically altered; it'll play just fine in any DVD player, including the ClearPlay model. Second, it's user-defined and controlled; while it's not the user that is making the edits, s/he is in control of whether or not the feature will actually be used, and to what extent. Third, and this is my biggest peeve about the court case, if Soderberg et al win, this will further restrict our freedoms as to how we can use copyrighted material. Fan edits? Fugeddaboudit. Chapter search? Ditto. Time code search? Ditto.
BTW, there is legal precedent for ClearPlay and other editing software producers to win this case. It's called Nintendo of America v. Lewis Galoob, more commonly known as the Game Genie case. Here, the judge ruled that Galoob's device did not infringe copyright by creating a derivative work; the derivative work was not in a fixed form, so a person could take the cartridge, w/o the Game Genie, and still play it normally. The parallels are obvious. As a side note, Intel has submitted a brief of amicus curiae supporting this side of the case.
What concerns me more are companies that rent and sell edited versions of movies @ a premium. These guys should have the book thrown @ them.