HDCP doesn't lock out older monitors, but it does reduce picture quality
Some marketing literature has attempted to distinguish HDCP from copy protection schemes, perhaps to appease movie studios and content providers whom this technology directly addresses. Technically, studios can still apply their choice of copy protection schemes to the medium of choice - for high-definition discs of the future, whether Blu-ray or HD DVD, AACS will be the apparent copy protection method. But HDCP is a kind of copy protection scheme, but using network terminology, it "resides at the transport level." In other words, it protects the transmission of content over cables ("digital video interfaces," or DVI). The scheme is reportedly not flawless; the encryption scheme that is, however, has yet to be announced by anyone, anywhere.
In August of last year, the US Federal Communications Commission formally adopted HDCP. As a result, high-definition equipment approved for sale in the US must support this protocol; both HD DVD and Blu ray have already complied. Because Gateway's monitor is as large as it is, and has a resolution high enough to support high-def video, it may have had to support HDCP by federal mandate - in other words, Gateway didn't have a choice.
The HDCP technical protocol itself does not stipulate how devices are to function when connected digitally to non-compliant devices, or those that don't speak the language. However, since its candidacy for adoption as an FCC protocol, its licensing body has drafted a document that mandates as a code of conduct, not a technical protocol, how manufacturers are to treat non-compliant devices, in circumstances where they're used to view and perhaps record digital broadcasts. In a 2002 draft plainly entitled, "Requirements for the Protection of Unencrypted Digital Terrestrial Broadcast Content Against Unauthorized Redistribution," the licensing body stipulates that compliant devices not pass "unscreened content" (not HDCP-encrypted) to a non-compliant device, unless it's an analog TV - in which case, a copy made from that TV would have lesser reproduction quality - or, among other circumstances, the following:
...where such Covered Product is incorporated into a Computer Product and passes, or directs to be passed, such content to an unprotected DVI output as an image having the visual equivalent of no more than (a) 350,000 pixels per frame (e.g. an image with resolution of 720 x 480 pixels for a 4:3 (non-square pixel) aspect ratio) and (b) 30 frames per second. Such an image may be attained by reducing resolution, such as by discarding, dithering or averaging pixels to obtain the specified value, and can be displayed using video processing techniques such as line doubling or sharpening to improve the perceived quality of the image.
In other words, the requirements of conduct mandate that playback devices must intentionally blur their output when they know they're connected to non-compliant or low-definition displays. This is how Vista gets around the problem of us continuing to use our old monitors: In order for Vista to comply, the HDCP devices that Vista supports - presumably through drivers - will intentionally reduce quality of output for older monitors. This way, any "daisy-chained" recording through those monitors will result in a lesser quality reproduction.
The April 2002 draft of this requirements document remains the latest one publicly available. What is curious about this particular draft is that it maintains a placeholder for a section that would, at some later time, specify just what a "Covered Product" should be. In other words, the current language doesn't state which CE or PC components would comply, and which don't. The placeholder language asks the reader to refer to "studio representatives to the drafting committee" - apparently a reference to technology representatives from major studios, who may have created such a list in the over three years since the document was drafted. However, the details of such a basic hardware requirements list, if it exists, are presently unknown, at least to the public.