Actually...
It's a way, of starting up, you'r own personal written programs for the ps2.
The technology in itself is actually 100% completely legal.
Still...
As for guns, knifes and explosives too..
All things and technologies can be used for illegal actions, only in some countries, it is illegal to boot your own personally programs, that you have programmed your self, using a playstation... Short...
Illegal to use you'r own ps2 programs, written for the ps2 on the ps2.
As for the ps2 slim, sony found this out, and they have designed the Ps2-slim, that this memory-card exploit thing doesnt work anymore...
For owners of the fat (old design) ps2, it is still possible to use mc-exploits.
Ahhh...
As for law makers... Well. It is legal for me to make a backup, of my personally and legal bought ps2 games... :D