A term used to describe some seemingly "open" and possibly even standardized system that has been covered with multiple software patents so that there's no way to implement the system without implementing something patented (and probably getting you sued out of existence, knowing the mighty power of lawyers of the day).
This term has become one of the catchy phrases of the day when describing multimedia codecs of MPEG family. While they have been standardized by ISO, the methods used are generally patented. It's hard to sneeze to the general direction of MPEG-4 without blowing off your nose.