This is a big deal. AACS (Advanced Access Content System), the copy protection is used in both Blu Ray and HD DVD, might have been cracked—but it’s still a rumor.
If it’s true, what will be interesting is the system’s in-the-field recovery system. Will it work?
Hypothetical fallout could be something like this: if PowerDVD is the source of the keys, an AACS initiative will be launched to revoke the player’s keys to render it inoperable and in need of an update. There is some confusion regarding this process, however. It is not the case that you can protect a cracked player by hiding it offline (the idea being that the player will never “update” with new code that way). Instead, the player’s existing keys will be revoked at the disc level, meaning that new pressings of discs won’t play on the cracked player. In this way, hiding a player from updates will not result in having a cracked player that will work throughout the years. It could mean that all bets are off for discs that are currently playable on the cracked player, however (provided it is not updated). Again, this is all hypothetical at this time.
Copy protection is inherently futile. The best it can be is a neverending arms race, which is why Big Media is increasingly relying on legal and social barriers.
EDITED TO ADD (12/30): An update.
EDITED TO ADD (1/3): More info from the author of the tool.