Let me start this post off by pointing out that I am not a lawyer, and I don't even play one on TV. I have, however, been called for jury duty a few times, so I know my way around a courthouse.
Melvin, being the clever man that he is, realized that he shouldn't have to purchase two copies of Super Monkey Ball: one for his wife's iPhone and another for his. FairPlay makes it clear that those apps should be able to run on multiple iPhones, so after some poking around Melvin got it to work. Check out his blog for the blow by blow account.
Clearly, this approach is kosher as far as the DRM is concerned, but do iPhone apps have licenses that supersede the FairPlay wrapper? I haven't agreed to any per app licensing agreements when installing something on my iPhone (as of yet) though that doesn't mean they don't exist (as I pointed out above I'm no Perry Mason).