It's too soon to be able to comment fully on this ridiculous situation, mostly because SCO, who is alleging that Linux illegally contains their intellectual property, can't or won't be bothered to actually articulate their concerns in a substantive way that people could actually respond to.
But there is something wrong when one company, or even one man (interview with SCO's Chris Sontag), can nearly paralyze an entire industry and all its users by aggressively - if not justly - wielding the legal system as a weapon.
There are in fact many things wrong with this whole situation. Another is that there's something very amiss with intellectual property laws if a private concern can in any way co-opt communal labor, in this case that of the Open Source Linux community. Open Source initiatives protect us all from the whims and ulterior motives of private software companies (even the most progressive still needs to have an eye on the bottom line, a priority that can sometimes be inconsistent with providing stable, robust, or secure software to fulfill its users' needs). We are much better off if these groups and software products survive and thrive, giving us viable alternatives to solely proprietary offerings.
(As a counterpoint to the interview, this was a comment on Slashdot.)