The noPhoto is a frame that goes around your license plate. It has a sensor at the top that detects when a flash camera (like those installed at stop lights) tries to take a picture of your license plate. When the sensor is activated, two flashes go off on either side of the license plate, obscuring the number in the picture. Here's a video demonstration:
Yes! Since there is nothing physically covering or obscuring the license plate, the noPhoto does not violate any license plate cover laws. Quite literally, we are using the same light and the same bulbs that red light and speed cameras do. The noPhoto does not cover any state names, and there are no laws in existence regulating how much light is cast onto the license plate.
If this thing does get funded, I bet there'll be a lot of cars with Ron Paul bumper stickers sporting a noPhoto license plate frame. Then I bet there'll be a ton of new laws passed around the country to make these things illegal.