This is CDDB2; the info is better than the "free" CDDB database (eg, few truncated titles, genre & year info, etc). It's the same stuff that you get with (eg) a registered version of musicmatch.
You can update the track info yourselves, by hitting the edit button, by plugging in a USB keyboard, or via emplode.
You can't change CDDB server (there is only one; the gracenote one), and can't upgrade the database yourself (there may be updates available, however, but they are ~400MB. Incremental updates may come later).
It can be used as a CD transport to just play a CD, yes.
Hugo