Supposedly the movies would be watchable on the iPod or iPhone, but could not be copied, and would not actually be purchased. You'd have a 30 day access period to the movie for $2.99, but CNN doesn't say whether that means you get to watch it once during the 30 days, or if it's yours for as many times as you want it during the period. The low price says just one viewing to me (since iTunes movie purchases are at least $9.99, if not more), but you never know.
Of course, the big question is: would you do it? If incorporated with the iTunes WiFi store, I think it could be huge-- be somewhere bored on your iPhone, click a few buttons, and be watching The Incredibles within minutes. But as usual, it all depends on what the studios want-- if the whole process is burdened with DRM, and I get error messages when I try to re-sync with iTunes, they can keep their rentals. I'll just make a note to put it in my Blockbuster queue.