Even though I've posted this before on the Adobe Illustrator User to User Forum, I thought I'd post something here as well only because I see so many people still asking about it. The questions range anywhere from "what is that gray box that always seems to appear on my screen when I'm working in Illustrator?" to "WHY DOES THIS STUPID GRAY BOX KEEP POPPING UP ON MY SCREEN AND WHY CAN'T I MAKE IT STOP?"
Ah yes, these people have all discovered Illustrator CS's ability to isolate groups. I personally refer to it as Group Isolation mode.
The actual premise for the feature has value, but the implementation leaves much to be desired. Hopefully, this post will clarify the behavior to at least help people understand what is happening, and maybe even to use it once in a while for benefit.
Basically, the idea is that when you have several objects that have already been grouped, you might want to draw additional objects into that existing group. Rather than draw a new shape, ungroup all of your objects, and then regroup them with the new shape, you can double click on the existing group first, to isolate that group. This action will cause a gray box to appear around the boundary of the grouped objects, and is an indication to you that you're now in this group isolation mode.
Any new shape that you draw will now be drawn into that isolated group. To exist group isolation mode, double click anywhere outside the gray box, or select any object outside the isolated group.
Another to activate group isolation mode is to click on the icon that appears in the Control palette whenever a group is selected. The icon looks like a rectangle with four arrows within it.
In truth, the isolation feature was added mainly to assist in the creation and editing of Live Paint groups. When you isolate a live paint group, the gray box appears with stars on the corners, indicating the live paint group (as opposed to a regular group).
So why do I hate this "feature" so much? Mainly because I find myself double clicking often enough that I enter group isolation mode when I don't intend to. It seems to always get in the way. Also, I don't really think the way this feature asks me to. Usually, I have all of my objects created and then I group them. In this case, group isolation only works when I'm drawing a new shape that will be added to an existing group. It just isn't often when that happens (with the exception of working with live paint groups, where I admit that such a feature is useful).
I just wish there was some way to turn this feature off, or to disable it somehow. It's almost as annoying as when I accidentally double click on a text object and my tool changes to edit the text. Let's hope Adobe modifies the behavior of this feature in the next version so that we can derive the most benefit from it with experiencing isolation frustration.