That is amazingly cool, actually.
I mean, I can't see this becoming the "future of music", but for those who love the past, it could be a godsend. Consider the staggering number of vinyl records in existence. Now consider how many of them have actually been released in a digital format. My guess is less than 60%. Probably less than 40% for "legitimate" releases, but there are people out there carefully digitizing their old 78s and putting them out in the wild for people to download.
The biggest problem with this process is that for many albums, there are no masters. After 50+ years, it can be difficult to keep track of some of these things. It's not uncommon to hear a CD where the best example of a song came from an old record, complete with various hisses, pops and scratches. You can digitally edit these, and even attempt some noise reduction, but the quality always suffers.
Add to this the problem that every time you play a record, you're causing just a little more damage to the grooves. I don't know if this digitization process can be properly refined, but the potential is out there. You find an old album, scan it in (subjecting it to nothing more harmful than 30 seconds of light), put the album away, and then start digitizing.
I doubt we'll ever achieve sonic perfection with this process, and many great recordings are going to be doomed to crappy reproductions. But at least this is a step in the right direction in terms of preservation.