Toshiba To Halt HD-DVD Production
Multiple users have written to tell us that Toshiba is planning to halt production of devices related to HD-DVD. According to Japanese broadcasting network NHK, Toshiba will lose "hundreds of millions of dollars" as the format war finally draws to a close. Regardless, investors are pleased that Toshiba has made the decision to cut its losses. This comes after a last-ditch price cut was unable to prevent Wal-mart from throwing their lot in with Blu-ray, although some sources suggest that Wal-mart was already aware of Toshiba's plans to withdraw from fight.
Hence the reason for region encoding.
Which is almost certainly illegal (shame no one has been sued yet).
http://blog.nexusuk.org
Well in that case they must think 'Ze Germans' are still on there way because even the new housing is built the same way.