The tide seems to be turning against the RIAA/MPAA, damages 100s of times the cost of legitimately downloading the song are being questioned, the ruling that an IP address != a person and other stuff that is making it less likely that the copyright groups will be able to mass litigate going forward so they are starting to look for extrajudicial means.
The scariest thing to me about this article is this: This is basically a system of penalty, based on enforcing the government's laws (even though lobbied for by the RIAA et al), that is not dealt with in courts. In the US at least we have the idea that our judges/juries are either our peers or are elected by our peers. There is a sense that they act on behalf of the collective will in transparent ways and are always accountable in some sort of way. It's a way for the community to enforce its norms on its members (for better or worse).
In the system propsed in this article there are consequences to the file sharers. And there is no accountable system for doling out these consequences. These are not our peers judging us. These are corporations who have very vested interests, which are not the interests of the populous it is enforcing them upon. I'm worried that this will become something of a precedent.
I think another really good example of this in action is the Visa/Mastercard embargo on Wikileaks. Operating outside of any judicial framework they barred funds to Wikileaks and its host for months. Then as soon as they get sued, and there is the prospect of having to account for their actions based on real laws they cave in, implicitly acknowledging the illegality of their stance. It seems that however powerful this government/corporation blanket of control thinks it is it still fears having to account for itself in the courts. An independent judiciary is a great check to power. The RIAA/MPAA are attacking one of the few checks on power that still give me hope that the idea of government the USA stands for can be salvaged.