From this post on Slashdot:
. . . these new "MP3 players" can finally play MP3 natively, not just Sony's proprietary ATRAC format. But wait -- you cannot just put your MP3s onto the device, you have to run them through Sony's obfuscation software first. The obfuscated files, when installed properly on the device, can be played. But you can't just move them around, share them with your friends, whatever. Well, of course the obfuscation scheme has already been broken by a brave hacker.
Sound like they might as well just have required you to convert everything to ATRAC; it’s going to be hard to beat Apple if you don’t make your product easy to use.