"Product line" is unlikely to be designated as anything other than one of 3 categories:
A. Products published under the 4e D&D GSL.
B. Products published under the non-D&D GSL (to be released in 2009 or later).
C. Products not using either GSL.
If they want to add further definitions of what "product line" means like dress, publishing method, self-titled categorizations, or some other refinement, Wizards can do so. But it doesn't appear necessary to me. The new d20 logo is product line identity enough.
To be more specific:
Every game on the market right now falls into group C.
Every game that wishes to join groups A or B will not be able to republish the same works under group C again (or possibly not until the GSL is entirely revoked).
A company publishing multiple "product lines" (i.e. A, B, & C) will not be able to use material from lines A or B for any C line. This is the same as if the company wanted to use World of Darkness rules in any product they publish at all. Once a product moves from line C to lines A or B it is under that respective license and the intellectual property cannot be moved back out. So no republishing of older books once they are published under a GSL.
Also, "fantasy" won't be defined by the 4e D&D GSL or the non-D&D GSL. At least, it appears very unlikely Wizards will do so. Terms like "fantasy" can certainly be defined legally without real world correspondence, but doing so isn't necessary in this case. They won't need the distinction as the only distinction required is whether a product uses the A or the B GSL license (D&D or non-D&D).
For instance, a product could be released under the D&D GSL and not be fantasy as you or I define it colloquially. Similarly, a product could be released under the forthcoming non-D&D GSL and be very much fantasy-based. I highly doubt Wizards will try and define a conceptual difference between the two in the licenses. Each is really all about the specific SRD references the licenses open up, not categorical defining ephemeral things like "fantasy".
Also, I doubt they will define fantasy to impede any company from publishing group C products that might fall under their defined term of "fantasy" either. Such a thing would be dubious in the least and Wizards has been pretty up front with their true intents. I don't think D&D needs to defend itself from any other fantasy game by making any company that uses the GSL cease production on non-GSL fantasy games. It would be overkill and hurt the industry in the long run, something no one wants.
What is left an open question as of now is whether or not products lines can be both A & B. A product both traditionally D&D fantasy and non-traditional D&D might need both areas of licensed rules to cover their material adequately. For example, Empire of the Petal Throne or Iron Kingdoms might qualify as each is somewhat D&D-like and somewhat not. My own guess is Wizards will allow double licensing as long as they are their own licenses.
One loophole around publishing material both under the GSL and not under the GSL is possible, but not really advisable. Potentially, a game company could publish a product under no license (or any open license) and then later publish the same product under one of the GSLs. This is precisely what will be happening when publishers shift old product over to the GSL. They could potentially continue to publish product without any connection to the GSL, but whenever they crossed over and published said product under the GSL no other version of it could be sold from that date on. It would be like selling a non-4e product in hopes it will sell out its' run and then republish an entirely new batch of the product under the GSL in hopes it will sell out a second time. It's just not wise business practice.
I would say this loophole is possible regardless of how they define the GSL unless they refuse old products from being republished under it - also an unwise decision as Wizards will want as many IPs of current products under the GSL as possible.
The other thing I'm unsure of is how feasible it will be to pull new innovations published under a GSL into the wider open gaming community. The GSLs won't last forever and having so many of the new gaming innovations published under them restrict those innovations to a single community - not that joining the GSL community will be difficult, but it is not the whole community. This is more about the significant lessening of free ideas being added to the current Open Source community. New innovations under the GSL won't be open source, so OS community will shrink regardless as many major players move away from it (having to decide between adding to the OS or the GSL).
Another interesting question is what material will and will not be open for 3rd party GSL publishers to share amongst themselves, but which will still fall under the GSL. Essentially, I believe a limited open source clause within the GSL license for shared materials is very necessary. This particular issue hasn't been addressed yet, but I feel it is needed within the GSLs or 3rd party publishers are likely to become insular in their own sharing of innovations. And not just between their own 3rd party competitors, but with Wizards too.
By not having a community of shared works the benefits of open source communities (how their sharing can pay dividends back to every company, not just one single large company) are soon forgotten. If every product published under a GSL can only be proprietary, publishers attitudes can easily slip into back into seeing themselves as true competitors again vs. allies. Namely, by saving their best innovations for non-GSL work. Without 3rd parties able to share their own GSL materials amongst themselves (and Wizards) preferences may well decline for open source RPG publishing altogether. Forget actual non-GSL open source publishing as that looks like it will decline regardless.
