My friend's two year old has been using it for the last month and while he's not "reading" anything yet, his language skills have improved greatly because of hearing and seeing the words and associating them with the pictures!
To respond to the comment about it being memorization, as an educator, I will tell you that most children who "read" their first books know them only from memorization anyway!(from hearing Mom and Dad read them over and over again!) Also, any kindergarten teacher will tell you that children recognize "sight words" before they can actually read anything using phonics. This system gives children a head-start to making the connection between the written word, sound and pictures.
I would hesitate recommending this to anyone who is looking for a babysitter for their child, but as an educational tool, it seems like a great system! Of coures, parents should not neglect utlizing other learning activities with their children such as reading and exploring their world. If children are going to be watching TV, I would prefer them to be learning something. One of the things that is great about the "Your Baby Can Read" system is it also incorporates books and flash cards into the learning tools. I recently ordered it for my 9 month old. We have not started the program yet but I am excited to use it!
Good luck, whatever you decide!