It should only be for purchased videos, most likely full films, tv episodes and music vids. It's a form of DRM, so that you can't share purchases videos and music with your mates.
I have two ps3s, I start watching a film on one.. Deactive the video feature on one and active it on the other to finish watching it in bed.
It doesn't affect streaming media just downloaded stuff.
Yeah.. I got gift'd some films from psn one Christmaslol
There is an option to de activate all systems via the website but there's a time limit on how often it can be done.
You need to have access to the system to deactivate it.
Why? As my screen shot shows I can deactivate my PS3 online, I can do the same for my Vita.