The legality of mod chips in the United States and many other territories, including Australia, are cloudy. They do violate things like the United States' DMCA because of their ability to circumvent copy protection, but the legality of a device must be determined on a case-by-case basis in court.

In Australia, Sony is looking to do so with the PS3 Jailbreak device and has gotten the federal courts there to issue a temporary injunction against the sale of this device through August 31 (via Kotaku).

During this time, all of the offending chips will be left with Sony's people, while the long-term legality of the device is examined. If the courts do not decide to ban the chip, they will go back on sale on September 1.

We'll update you when a decision is rendered.