You always have to read the fine print with any offer these days. So what does the small text in the Blockbuster ad here in Canada tell us (this text is actually from their website):

However, if a member chooses to keep a rental item more than one week after the end of the rental period, BLOCKBUSTER will automatically convert the rental to a retail sale on the eighth (8th) day after the end of the rental period (the “sale date”).
[...]
If the member returns the item within 30 days of the sale date, BLOCKBUSTER will credit back to the membership account the amount previously charged to the member’s account, as applicable, for the selling price of the item, but the member will be charged a one-time restocking fee of $1.75 per unit plus applicable taxes.

So this translates "no more late fees" into: You can keep the movie for up to 30 days for a 'restocking fee' of $1.75 plus tax. If you keep the movie longer you buy it possibly for the purchase price of a new item (see details on their site).

While I guess this is much cheaper than the usual late fees (I don't really go to Blockbuster, so I have no idea what the late fees were before this), to me this is certainly not the same as 'no more late fees'. Even if you call it a 'restocking fee' it still remains some type of penalty for returning the move late. Just my two cents.

[update]
After talking to one of my colleagues about this, I would like to point out that this change is still quite a money-saver for people who often keep their movies longer than the standard rental period ;-)