It's one of many, many research projects in thermochemical hydrogen production -- the idea of splitting water using only heat (thermal decomposition), indirectly through longer chemical processes. It's been going on since at least 1977 [1], and there's 352 known thermochemical cycles for splitting water [2] (including zinc/zinc oxide), including the 14 listed [2] on wikipedia. The news today is that a grad student in Delaware built a small lab version of one of these, which he plans to run experiments with. His school media office wrote a press release for him [3], which was cloned by Physorg and written about on a few blogs.

In general, the idea (thermochemical hydrogen production) is just what you say -- heat in (solar, nuclear also researched), hydrogen out. No byproducts, as the chemical intermediates form a closed cycle.

[1] http://www.osti.gov/energycitations/product.biblio.jsp?osti_...

[2] http://en.wikipedia.org/wiki/Water_splitting

[3] http://www.udel.edu/udaily/2012/apr/solar-reactor-040312.htm...

Is thermochemical production much more efficient that say simple electrolysis of water using electricity (which could be produced by photovoltaic solar panels) without the extreme temperatures.

It's not that newsworthy:

The general idea is well known: http://en.wikipedia.org/wiki/Photocatalytic_water_splitting

This specific method is also well known: http://en.wikipedia.org/wiki/Zinc_zinc-oxide_cycle

And there are many other possible cycles: http://en.wikipedia.org/wiki/Water_splitting

At 2500c water will split into hydrogen without any help at all: http://en.wikipedia.org/wiki/High-temperature_electrolysis This reactor runs at 1600c.

This is basically a combination of the two things - use a lot of heat to make the reaction easier, and use solar catalyzed reactions to take it the rest of the way.

Sunlight, zinc oxide, and water goes in, hydrogen comes out. This is a prototype about to undergo 6 weeks of testing to answer the very question you pose about it being economically competitive. The main advantage this has? No emissions such as carbon dioxide.

Do any solar-powered generators of hydrogen produce carbon dioxide? Is the idea here that this would be a primary source of hydrogen for cars? Or is it only competitive in certain restricted applications?

"The main advantage this has? No emissions such as carbon dioxide."

Thats great, but who is going to use it if it isn't cheaper than alternatives?