This should be two questions:
"Whether the 2006 and 2007 trials of the Phorm system was in breach of European data laws"
"Whether any future trials of the Phorm system will be in breach of European data laws"
For the first question I will undoubtedly say yes. Unfortunately neither the home office, the police, the ICO, or any government department wish to see action taken for breaches of some if not all of PECR, DPA, RIPA Computer Misuse, etc.
For the second question the forcing of the system to be opt-in only will make it legal from an ISP customers point of view but not for webmasters.
The legality of using website content in order to generate advertising information for your competitors is not something website owners will take lightly and I envisage a lot of copyright infringement notices being issued.
Google uses keywords from your site to drive customers to your site.
Phorm uses keywords from your site to drive customers to your competitors.
[edited by: Frank_Rizzo at 3:20 pm (utc) on Aug. 6, 2008]