The regulation mentioned above is correct (14 CFR 91.119), but it was taken somewhat out of context. In part D, it says:
(d) Helicopters, powered parachutes, and weight-shift-control
aircraft. If the operation is conducted without hazard to persons or
property on the surface—
(1) A helicopter may be operated at less than the minimums prescribed
in paragraph (b) or (c) of this section, provided each person
operating the helicopter complies with any routes or altitudes
specifically prescribed for helicopters by the FAA; and
(2) A powered parachute or weight-shift-control aircraft may be
operated at less than the minimums prescribed in paragraph (c) of this
What this means in practice for most of us, is that generally speaking we'll stay at 500-1000, depending on where we're flying, but we often practice auto-rotations and inclined landings in areas off airport, so when taking off and landing, we'll be at much lower altitude. If there's fixed wing traffic, as there often is in Chicago, ATC will direct me to fly at lower than 500 (they'll generally ask me to stay below 500 when I fly along a route also used by fixed wing).
As it was explained to me, we're allowed below as long as we're not conducting ourselves with hazards for the people below, and generally it's more or less using reasoning and common sense. So I can stay relatively low to the ground, but if I started trying to fly between buildings here in Chicago, that would be considered unsafe and a violation. On the other hand, we'll practice off airport landings and maneuvers quite close to the ground, but they'll be in relatively isolated areas (fields, hills, etc.). Over the water, flying at an event like in the picture, if it's condoned/expected for you to be there, it wouldn't be considered a hazard. If you were a private pilot that hadn't requesting it beforehand, I'm guessing you'd be hearing from the FAA.