Update: More information has been discovered on Netflix and HDCP lockouts, and it isn't as bad as first determined. It seems that the problem lies within using video adapters for the 360 to plug in displays it won't normally use, and that some displays do not support HDCP over DVI. As mentioned in the article, it still is not an ideal situation, but one that will affect a very small group of people.
Netflix streaming on the Xbox 360 has been in the works for a while, and it is finally getting closer to reality. There are a few setbacks, though, and one of the largest of them could prevent a significant number of people from being able to use the service. It seems that Netflix is insisting on including HDCP protection in their content.
For those of you who don't recall, HDCP is the copy-protection mechanism built into modern cards and displays to prevent "unauthorized" duplication of content. Unfortunately for many users who were stuck with HDCP content, many video cards were lacking HDCP support until fairly recently, and many older displays do not support it at all. This includes the majority of CRT TVs and many older LCD TVs as well. As it stands, it looks like if you don't have an HDCP-supporting display, you won't be able to use Netflix streaming service on the 360.
Maybe only a minor portion of Netflix customers will be affected by this, but it's possible that other platforms will be affected by this as well, such as any upcoming hardware with Netflix streaming capability. It's even possible Netflix will try and push this on PCs as well, despite the fact that there is already a considerable level of DRM on streamed content.