The US preaches free markets to the rest of the world, yet the IT programmers there seem to think they are entitled to a monopoly on jobs.
I thought free market capitalism was about open market and prices based on demand-supply.
Why are IT workers so threatened by this? Is it insecurity about their skills or ability to compete?

Considering the way China and India are growing, many of the brightest graduates that are turned out from state-subsidized universities are better employed at home.
There was a time in the last 2-3 decades where a highly qualified engineer from these countries had no choice but to emigrate to the states to have a career. This is increasingly no longer necessary. Making it harder for people to move to the US will have the beneficial effect of halting the brain drain in these countries and keeping the brightest minds home.

This is not true, or at least wildly inaccurate. The main Indian Government-owned ISP, BSNL, has not blocked any of these websites. Many of the private ISP's haven't either. There is one private ISP -- Reliance Infocomm -- which is owned by the Reliance ADA Group, which happens to also have considerable interests in content generation (they produce bollywood movies, and also are major financial backers to Spielberg's Dreamworks SKG). They are known to block torrent/video sharing sites during prominent movie releases.

The reason I posted this bit of news, is the rather unconventional crowd-sourcing/collaboration approach to science, coupled with the idea of involving non-specialists in his attempt. Would like more informed opinions on this approach to doing science. Even if he fails at the attempt, would, say, a person with an engineering background participating in such a workshop stand to gain anything?
Is this a ponzi scheme or good science with a dash of showmanship thrown in?

I worked for a while in India, and am now in the US finishing my Masters in CS. Here are my two cents.
Computer Science education in the US is still leagues ahead of any other country in the world. The IITs and IISc in India are good institutions but still do not have significant research programs that compare with any of the top universities in the US. I suppose the story is similar across the world. Given the option, everyone in the world would like to be educated here in the US :-) -- if you are being given this on a platter, why let go of the opportunity???
I applaud your intentions of exploring the world -- I do believe that Americans should be more outward looking and understand the world around them better. Also many of the new business opportunities will likely arise out of South Asia and China in the next few decades.
However from a technical perspective, US is still the place to be as far as CS is concerned.
You would be much better off getting the best training that the US has to offer, and then going out into the wider world -- your skills will be much appreciated, and you can make a more substantial contribution to the world.
I am much impressed by the scientific culture that American universities inculcate in their students, and I do believe the world would be a better place if that culture were propagated more aggressively.