Mod chips themselves aren't illegal, your 
warrenty just becomes invalid.   I actually had 
a modified Neo-Geo cartridge system a long time 
ago that added a switch for USA / Japanese / 
arcade modes.  Best system ever created for its 
time I think.  Magician Lord rocked!

Now what you do with the modification (play 
bootleg games, etc.) is whats considered 
illegal.  Pretty hard to bootleg a $250.00 per 
game cartridge system...lol...so I was in the 
clear.  :)