That's exactly correct. The specific rule that used to apply was the "honor all cards" rule from Visa & MasterCard. That has been amended as a result of the law suit.
The big advantage of processing a PIN-based debit card is that a merchant pays only the debit per trans fee. With signature-based debit (i.e. debit being used as a credit card), the merchant pays BOTH the discount rate and the per trans fee.
All that being said, this change is really applicable only to "bricks and mortar" merchants and has virtually no impact on Internet / mail-order merchants.
Of course, it is also interesting to note that while Visa and MasterCard agreed to refund certain fees back to retailers involved in the class action suit and make these changes - they also announced a new cost increase in their Interchange rates almost immediately thereafter. Coincidence? I think not.