I may be getting it mixed up with another one, but here goes. The idea behind soverign citizenship is that ‘United States Citizen’ is a specific term that only applies to certain types of people mentioned in the 14th amendment (basically, people who were not considered citizens of their state like slaves). By declaring yourself a ‘soverign citizen’ or citizen of a particular state, you are no longer a ‘United States Citizen’ and so are exempt from any laws that apply to a US citizen, such as tax laws and vehicular laws. Needless to say, not many people buy this twisty argument, especially the group of people who are judges.
And it’s a scam because people will offer to sell materials and ‘consulting’ on how to become a soverign citizen, most commonly to try to get out of paying taxes. This sort of thing works about as well as trying to get out of a ticket by claiming that it doesn’t apply to you because they capitalized your name wrong or based on the trim on the flag in the courtroom; that is not at all. If you go to the IRS site http://www.irs.gov/ and poke around at the tax fraud page, you can find some info on ‘soverign citizenship’ and the fact that, whether the argument makes sense to you or not, the courts don’t buy it.