Region code is a new invention by the movie industry to screw with their customers and prevent them from using what they can legally buy. Actually, it is meant to allow movies to be published on DVD while they are still awaiting their run in cinemas on other continents, without risking losing income because of imports. How they were able to survive in the video tape era remains a mystery. ;-)

The Region Code works by giving any DVD a certain number for the areas it is licensed in. For example, a US release would be coded to only play in 1, while a European (and Japanese) release is coded for region 2. The DVD player (and in case of drives in PC's the software) checks for this code on the DVD. If they match, the DVD is played, if not, it is refused. So if someone legally purchases a DVD in the States, and returns to Europe, he won't be able to view the contents on his locally bought player. Fun, eh?

The world has been arbitrarily carved up for maximum profit thus:

Very few releases are still Region 0, playable everywhere on the globe, as most licensors require their licensees to fix the DVD to a certain Region. There is a possibility of multi-region releases as well, but this is done even more rarely than Code 0 releases.

Luckily, most players are adaptable either by secret menus, firmware updates, new BIOSes or hardware modifications, so one does not have to put up with this nonsense. And it is legal as well, as Region Codes are not a copyright protection device as such. To this day, customers still have the right to actually use that which they legally bought.