Originally Posted by jasoraso
This question has been answered, but I thought I'd provide a little more detail to their answers:
On android, the memory is divided into several partitions (you might think of it like different disk drives), including a /boot, /system, and /data partition. The /boot partition is where the kernel (the heart of the android o/s) resides; the /system (where the bulk of the android o/s resides); the /data is where your apps and personal data reside. The /boot and /system partitions require system administrator level rights in order to change the information stored there (the system administrator account on android/linux is known as "root" or "superuser").
The update that came from VZW changed elements in the /system and /boot directories, using a superuser key to grant the update permission to change the files on those partitions.
Unfortunately, a factory reset only essentially re-formats the /data partition, wiping out all the user information stored there, but doesn't change the /system or /boot partitions.
The root process essentially hacks the device to gain system administrator rights to the android phone, using exploits in the android o/s. This is essentially a cat and mouse game. The update sent by VZW/HTC patches the exploits that were used to gain root access (that is why it is always dangerous to accept updates from VZW/HTC).
Hopefully the developers on this website will be able to find another exploit/weakness, and provide a way for those who have phones that have the update to obtain root, unlock the bootloader (another partition), and gain s-off (another level of turning a security flag to "off" so that even more partitions can be accessed/changed (ie.the /radio partition).
Excellent post jasoraso - I appreciate this community very much, but posts like these seem few and far between.