I recently bought some fabric with that "restriction" on the selvage and wrote the manufacturer to ask what limitations were on me as the consumer. Basically I can do anything I want - use it in a gift item, sell something I've made from the fabric, sell the fabric in a garage sale, etc., but I CANNOT duplicate the design and claim it as my own or use it in mass-produced items. It is generally a statement to manufacturers that they cannot use the fabric or image in mass-production without permission.
This is not to say every fabric line has the same intention when they put the statement on the selvage, but as said above, it's probably not a problem for most of us. We can continue to make quilts, clothing, accessories, etc. without fear of being tracked down by the manufacturer!