Not too sure if this has been asked.

I know that the HDCP scheme will downgrade any video if even one link along the chain isn't HDCP compatible. Then what happens when the signal from a standard-def DVD, or even a ripped DVD is sent through? does the signal get downgraded due to the absence of HDCP? Or is it played normally without degrading the signal?

Downgrading the video to a lower resolution is only one option. They also have the option to disable the video altogether, or output the video in an encrypted form. What you usually see is the latter option (encrypted video), and you end up with snow on your screen. It all depends on how the manufacturer of the source (DVD player, set top box, etec) chooses to implement it. As far as your question is concerned, the content that is played usually doesn't matter. Even though the HDCP spec only requires that the players use HDCP when the content itself is flagged as copyrighted material, most manufacturers simply implement HDCP on the player itself.