matte box?

- Adds light protection around the sides of the lens, not just through the standard sun shade but through removable flags for top and sides.
- Provides filter stages, both/either rotating and/or fixed, for square/rectangular glass filters.

Like anything in this industry, you get what you pay for. Cheap-o matteboxes are flimsy, don't mount tightly, and don't offer solid (if any) filter stages. The benefit of the filter stages is the ability to buy a single set of high-quality glass filters and use the same filter(s) no matter what lens is behind the mattebox. Rotating filter stages are good for polarizer filters, and for using things like grad ND to cut non-horizontal breaks in exposure. Fixed filter stages are good for things that don't require (or can't utilize) rotation, such as solid ND.
 
A lot of things, none of them critical for many productions. Like Alex said - they support things, like flags, barn doors, etc. Imagine shading your eyes in the bright sun and you'll get an idea of how important a flag can be sometimes. They also hold (hopefully) high-quality filters, and allow them to be rotated as needed. They used to hold shot-masking 'matte' cards (hence the name) but in these days of digital overlays, hardly anyone does that any more. They also look cool, especially when you have them at the end of a rail kit with a follow-focus and some other things clamped on. They might not help your shooting, but looking cool can at times let you charge more.
As for why they cost so much, there are several reasons. That 'looking cool' thing plays a part -- even when it is slightly less than fully functional, cool stuff always costs money no matter what it is. On a practical side, a manufacturer has to divide their hard costs by the numbers of units sold to get a starting price. Yeah....there's only a few bucks worth of material in a $500.00 matte box, but if anyone out there wants to drop a ton of money on machine and injection mold expenses and then charge a few bucks for their matte box, please email me pronto and I'll start re-selling for you at once. ;-)
 
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We really need to get past this "looking cool" thing. Just having a nifty-looking rig doesn't justify charging more. That's a cheap move. Having talent, and a really nice end-product that blows away the competition... that is what justifies a higher rate. Further, if you're going to charge more just based on having a setup that's eye-catching, you'd better have the talent to back it up or you're going to lost clients quickly.

The mattebox is a very handy device, but it's not something to sink money into unless you know exactly what it does, and you know that you need it and that it will help you achieve your vision.

As for price: there are really cheap matteboxes out there (much, much less than $500). They fall apart. They're flimsy. They wobble. The higher prices of the sturdy matteboxes isn't because they look really cool.

Like any product, there's a law of supply and demand. Why are consumer camcorders cheap, and pro camcorders really pricey? They are going to sell many more consumer camcorders. They aren't going to sell many $50k camcorders. The higher price comes not only with a more professional feature-set, but also the fact that they cannot sell them cheaper and be able to offset R&D and manufacture while still turning a profit.

Likewise, the cheap matteboxes that come out of China and India are quickly made, using much cheaper materials, with the intent of moving large numbers to folks who want to save money (lots of those people out there). The units from RedRock and Zacuto and Genus, on the other hand, use higher-quality parts and manufacturing, and the companies know that they have a smaller consumer base (professionals who are more concerned with the quality of their gear for practical purposes).
 
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