Molly Wood over at CNET has done a wonderful job summarizing what Sony-BMG's "rootkit" CD copy-protection is all about, and why it's such a bad thing:
So, let's make this a bit more explicit. You buy a CD. You put the CD into your PC in order to enjoy your music. Sony grabs this opportunity to sneak into your house like a virus and set up camp, and it leaves the backdoor open so that Sony or any other enterprising intruder can follow and have the run of the place. If you try to kick Sony out, it trashes the place. And what does this software do once it's on your PC? ... The DRM itself is almost unbelievably restrictive, and some have suggested that the reasoning behind it is part of Sony's ongoing war over digital music supremacy with the decidedly more supreme Apple.
Mark Russinovich, who originally broke the story, has lots of additional information, as well, including a detailed explanation of the risks associated with Sony-BMG's "patch" for the xcp copy protection.