The good news? If someone complains that this insignificant plug costs $50, tell them it’s a tiny computer!
They ripped the thing apart and found an ARM-based SoC built by Apple, complete with its own RAM.
Their guess was that this system was meant to enable AirPlay to more easily convert video output from a Lightning connector to HDMI. But an anonymous comment they link to seems to dispel that. Instead, this may be a fairly powerful micro-computer whose sole purpose is video conversion (as opposed to doing it on an iOS device).
Sadly, the video output from this adapter isn’t all that great right now (supposedly being worked on). Still, fascinating that Apple went through all this engineering for an adapter that relatively few people will buy.