EDIT: Lol, you beat me to the punch there. Well, I'll leave up my response to his question anyway in case it helps any (and in case I have any misunderstandings here that could use correcting...)
Well, the manufacturer calls it a "space age plastic" (I think they aren't aware of the fact that it's not "hip" to call everything "space age" anymore...) According to wikipedia, this sort of product uses various things such as rubberized asphalt and that seems a little more believable than some sort of plastic, but regardless, it gets the job done. If you look at car audio on Wikipedia you will see some other reputable brands as well:
Car audio - Wikipedia, the free encyclopedia
Basically what it does is it reduces the distortion. Normally the sound can actually cause the casing to shake which in turn distorts the sound by adding/removing its own vibrations. Most high end headphones are better designed to prevent this sadly. Unfortunately, Denon seems to have put every single penny of their research into designing the speakers themselves or something I guess because low quality build is the bane of the AH-D series. The idea here is to use something like this that can prevent the sound from getting distorted by the casing. It has a thin sheet on top (I guess aluminum?) that can reflect the sound so it doesn't just get absorbed and lost and then under that is the absorbant material so that vibrations are minimized. The end result is a much cleaner bass that interferes less with the sound.
BTW, has anyone tried something closer to the full Markl-mod on the AH-D1001/1000s? Eg, covering the inside around the speaker itself as well, though I also include in this covering more of the inside of the cup (I have nearly every open area covered.) I finally got brave enough to try it a few days ago. The first thing I noticed is that it's really important not to cover the two little holes next to the speaker, lol (the sound turned very flat and weak. Well, I guess that's kind of a duh moment for me there.) I think it helped the sound a bit more and I think I really like the sound of it after this. The bass is a bit more subdued (though still strong when things really use it and still able to make the casing vibrate, so I guess my modding still isn't perfect) but I think overall I like the sound of it like this a little better. The only catch is that for some reason if I have it turned up too much by accident it gets bad distortion for some odd reason. Well, I don't normally turn it up that loud anyway (this was just when switching between differently mastered discs with no replaygain in effect) so I think maybe it's ok. Has anyone else tried it who can maybe comment on it though? I don't exactly have audiophile-trained ears here. Of course, some of it is that I just absolutely can't seem to get the stuffing at exactly the right balance (I think I'm at least fairly close to right this time around though.) In particular, I'm wondering if maybe I'm just not noticing much smaller scale distortion at normal volumes? It seems like I would, but it's hard to say since, as I said, I don't really have audiophile ears.
EDIT: Correction. There are more than two holes on each speaker. I knew something still wasn't right. Be absolutely certain not to cover any of them or it won't really be quite as good. I ended up having to pull off all of the Dynamat I had on the inside part due to this mistake since they just didn't sound right with any holes covered. I haven't gotten around to putting some back on there because I finally decided to buy AH-D2000s and it just isn't worth the trouble I think.