MagicGate is fancy words for saying "We're Sony and we force encryption so people have to buy our proprietary devices" more or less. It's a form of DRM basically, and is how Sony tried to keep out third party companies from producing things to be used with Sony's consoles, or music devices (because believe it or not, it started with music).
This is why certain PS1 and PS2 games can't save or load (or corrupt your memory card) if you're not using an official one. That also goes for phones, camcoders, etc. I don't know if things like FreeMCBoot really need the MagicGate to work... Could be something else, maybe people tend to recommend official ones because of the 8MB size itself.
I've read that with larger memory cards the system gets boggled trying to look beyond the 8MB, and that can lead to issues, which is the reason often cited as to why Sony never introduced larger official cards (beyond you know, trying to make people buy several small ones instead of just a large one).
If anything I guess other officially licensed cards also use MagicGate and come in 8MB so they could potentially work. But now that I think about it, if the MX4SIO gets traction we'll probably see many memory cards destroyed to repurpose them...