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MaGIC is a protocol introduced by Gibson (the guitar guys) to move audio/video over Cat 5 back in 1999. I don't know much about it, but I think it was designed precisely to address some of the concerns you mention, such as latency. It's also supposed to allow plug-and-play and some other features, to make interconnections easy. Supposedly. IANAM (I Am Not A Musician)

Gibson MaGIC
http://www.gibsonmagic.com/

Gibson's MaGIC was the last music innovation that gave me goosebumps. I wonder if they'll showcase this technology at the show. Imagine plugging ethernet cable into a Les Paul!!! Through this technology, they're making it easier for musicians to jam together online regardless of physical location. There's soooo much more to this technology, so check out the link for details.

It is a guitar with digital output, the power is needed for adc and such. more info here
On a sidenote guitars with active pickups sometimes can get their power through phantom power via the signal cord, in addition to the more common solution of a battery.

For those interested, the Gibson Labs Magic site is: www.gibsonmagic.com

And the specification is: www.gibsonmagic.com/specification.html

For those interested, the Gibson Labs Magic site is: www.gibsonmagic.com

And the specification is: www.gibsonmagic.com/specification.html

"Hack the Gibson" is from the bad, bad movie "Hackers". The MaGIC digital guitar (here) uses Cat 5 (ethernet cable) but not ethernet signaling.

This is not actually a joke, if you read the description of the spec change history
(http://www.gibsonmagic.com/specification.html)
you'll see Revision 2.4: "Added copy protection bit."

Psyfir