These are the Regional Codes and their corresponding areas:

The main reason for these lockouts is that Hollywood usually release their movies in the Region 1 area well before they are available in the rest of the world. The 6 regions were established to ensure that people couldn't watch a DVD that hadn't been released in their particular area. Of course you can always have your DVD player modified, or if your player supports it, use a handset code to make the player Region Free. This will tell the DVD player to ignore any region coding.

A disc with no regional coding is usually marked Region 0 which means it will work on any player. Region 0 is most commonly used for pirate copies and porn. Damodred tells me that it is also used in countries that don't enforce region coding.

Update:
Australia
As of March 5th, 2001, amendments to the Copyright Act make it illegal to tamper with, or 'modify' an electronic device for the purpose of playing pirated goods. This is primarily to try and clamp down on people who make a living 'chipping' games consoles such as the Playstation and the Dreamcast. Apparently this law will apply to all digital devices, so I would assume that would make it illegal in Australia to modify your DVD player. This seems like a grey area though, what about handset codes? Would you be committing an illegal act by using one of these?