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There's a saying in Catholic circles: "Subtract 30 IQ points when the mainstream media discusses religion." This article is an example of that.

First paragraph:

Pope Benedict XVI has reversed centuries of traditional Roman Catholic teaching on limbo, approving a Vatican report released Friday that says there were "serious" grounds to hope that children who die without being baptized can go to heaven.

They didn't even go a full sentence without getting something wrong. Limbo was never a teaching of the Church. Just as we won't know the nature of Heaven until we get there, we can't know the state of the souls of children in this situation while we're on this world. So, Limbo was a theory developed by the Church to explain what happened to unbaptized children. It was never doctrine or officially taught as fact. (Although it may have been taught as fact by some, it should have only been presented as a theory.)

Third paragraph:

Although Catholics have long believed that children who die without being baptized are with original sin and thus excluded from heaven, the Church has no formal doctrine on the matter. Theologians, however, have long taught that such children enjoy an eternal state of perfect natural happiness, a state commonly called limbo, but without being in communion with God.

This is a good summary of it, somewhat making up for the errors in the first paragraph, although why this couldn't have been the first paragraph is a good question. The way it works in the Church is that questions that have not been formally defined by the Church are open for discussion and debate among theologians. (Although there are degrees of definition as well. You have to keep in mind the trend of Church feeling on an issue.) So, since the Church has (still) not made a definitive ruling on Limbo, people could still argue for it but need to be aware that the trend of Church teaching is away from this theory.

Fourth and fifth paragraphs:

"If there's no limbo and we're not going to revert to St. Augustine's teaching that unbaptized infants go to hell, we're left with only one option, namely, that everyone is born in the state of grace," said the Rev. Richard McBrien, professor of theology at the University of Notre Dame.

"Baptism does not exist to wipe away the "stain" of original sin, but to initiate one into the Church," he said in an e-mailed response.

A good rule of thumb: Anything Father McBrien says is not Church teaching, and usually diametrically opposed to it. Baptism is the normal means of salvation and wiping away the stain of original sin. But while that sacrament is how the Church wipes away sins, God is not necessarily limited to the sacraments. Christ died for all and God can apply that salvation as He sees fit.

"Parents who are mourning the death of their child are no longer going to be burdened with the added guilt of not having gotten their child baptized," said the Rev. Thomas Reese, a senior fellow at the Woodstock Theological Center at Georgetown University.

He said the document also had implications for non-Christians, since it could be seen as suggesting that non-baptized adults could go to heaven if they led a good life.

"I think it shows that Benedict is trying to balance his view of Jesus as being central as the savior of the world ... but at the same time not saying what the Evangelicals say, that anyone who doesn't accept Jesus is going to hell," he said in a phone interview.

Father Reese is on firmer grounds here. All can be saved, even those who have never heard the Good News. Despite what is commonly claimed the then Cardinal Ratzinger made that statement in DOMINUS IESUS. By my reading of it, he even seemed to imply that Catholics, having been exposed to the whole Truth are necessarily held to a higher standard than others. Even if someone is outside the visible boundaries of the Catholic Church, they can be saved and attain Heaven if they sincerely seek the Truth, which is Christ himself. This salvation does come through the ministry of the Church in some way we don't understand, for just as God is not limited to baptism to save unbaptized children, He is not limited to the visible confines of the Church to save those outside it. We do all have an obligation to seek the truth and the true Church of Christ, but God knows what obstacles we face in trying to find it. Perhaps we were never exposed to the Catholic Church, or we were taught falsehoods about it that we can't overcome, or perhaps some Catholics were so obnoxious that we turned away from the Church. No matter what might separate us from his Church, that is, the Catholic Church, we have the obligation to seek with complete sincerity the truth. If we do discover the Truth, it will lead us to the Church. But even if we don't discover the whole truth, God knows the sincerity with which we seek, since He knows all and can "grade us on a curve," so to speak.

One teaching in DOMINUS IESUS that might have caused people to believe Ratzinger was saying only Catholics can go to Heaven was that the Church is present in Heaven. As the Catholic ("universal" in Greek) Church is God's Church, of course those in Heaven are members of it, even if they weren't members of the visible Church here on earth. You can get to Heaven without being Catholic here on earth, but you will be Catholic in Heaven (and Purgatory, for that matter).

I went off on a tangent there, but this really isn't a big shift in direction of the Church. Limbo was never a central teaching of the Church, or a teaching at all, really. More is being made of this than really should be.