As the article says, some of the legal grounds are murky. Court rulings in the past have "found no violation of copyright laws in the use of VCRs and other devices to time-shift TV programs," i.e., making personal copies for the purpose of making portable a legally obtained recording. Musically speaking, this practice goes way back to recording audio cassette backups of LP records. By these criteria, everyone is a pirate. Arrgh!(TM)
Recording industry shills smugly point out that "there are consequences for breaking the law" -- even if that law was written by and paid for by the recording industry itself. There is a long history of stupid, immoral laws being on the books. If ever there were a situation to warrant jury nullification, this would certainly be one of them.
Update 1/3/08: Cnet's News.com reports that this story might be bogus. Washington Post, however, is sticking to the story.