This site uses images from the internet - and then modifies them - that feature entertainment and subject based content.  Is this legal?  Well yes - if used for satire and/or parody it is.  Below are some of the relevant legislation items and legal precedents:

Australian Copyright law:
COPYRIGHT ACT 1968 - SECT 41A

Fair dealing for purpose of parody or satire:

A fair dealing with a literary, dramatic, musical or artistic work, or with an adaptation of a literary, dramatic or musical work, does not constitute an infringement of the copyright in the work if it is for the purpose of parody or satire.

US Copyright law

The fair use defence in derivative work cases In Campbell v. Acuff-Rose Music, Inc., the Supreme Court found that although a parody of the song "Oh, Pretty Woman" by 2 Live Crew was an unauthorized derivative work, fair use was still available as a complete defence.

This case marked the Supreme Court's pointing to transformativeness as a major clue to application of the fair use defence to derivative works.

Transformativeness

A crucial factor in current legal analysis of derivative works is transformativeness, largely as a result of the Supreme Court's 1994 decision in Campbell v. Acuff-Rose Music, Inc. The Court's opinion emphasized the importance of transformativeness in its fair use analysis of the parody of "Oh, Pretty Woman" involved in the Campbell case. In parody, as the Court explained, the transformativeness is the new insight that readers, listeners, or viewers gain from the parodic treatment of the original work. As the Court pointed out, the words of the parody "derisively demonstrat[e] how bland and banal the Orbison [Pretty Woman] song" is.

The modern emphasis of transformativeness in fair use analysis stems from a 1990 article by Judge Pierre N. Leval in the Harvard Law Review, "Toward a Fair Use Standard",[16] which the Court quoted and cited extensively in its Campbell opinion. In his article, Leval explained the social importance of transformative use of another's work and what justifies such a taking: I believe the answer to the question of justification turns primarily on whether, and to what extent, the challenged use is transformative. The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. ...

[If] the secondary use adds value to the original--if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings--this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society. Transformative uses may include criticizing the quoted work, exposing the character of the original author, proving a fact, or summarizing an idea argued in the original in order to defend or rebut it.

They also may include parody, symbolism, aesthetic declarations, and innumerable other uses.

 http://en.wikipedia.org/wiki/Derivative_work