Is the law simply that you cannot use your employers resources such as computer and internet connection to create your side company, or does the law state that you cannot also use time your employer thinks is theirs for your side project?
My thoughts on this boil down to two simple rules:
1. don't work for assholes
2. Don't do something you would object to if done to you.
Most likely, you'll just be fired for non-performance but depending on the circumstances, your employer could sue for ownership. This would especially be the case if you went from Microsoft to Google or something similar.
It's called "founders syndrome" when you can't possibly imagine doing anything else other than pushing the business forward every waking hour, and then are surprised that to your employees, it's just a paycheck and they expect to have a life (and ideas) outside of work.
Oftentimes, the boss is aware of this and doesn't seem to mind. The people who do this are not the most skilled employees either. Yet, if I want to spend my "downtime" learning new technologies (which could actually help me do my work better), I feel like I have to hide it.
It would be nice if you could work on your own projects at work in the open as long as you weren't accessing internal company servers. I'd even be willing to bring my laptop in and connect it to the external-only wireless network if the company required that. When I can't improve my skills while at work, I feel that I'm wasting my time.
That sounds like a job description for working at home as a freelancer or remote employee.
On the internet, nobody can tell if you're an entrepreneur.
If you're going to work on a startup while employed elsewhere, you need better separation than this. Do your day job competently and quickly, then go elsewhere to work on your startup. Get up early, do your startup stuff, then get to work at an acceptable time. Or do it in the evening. But trying to mix the two while at your employer's office is a recipe for disaster.
Well, not only that, but it's written like a joke. "Walk around so no one can read over your shoulder, if you're afraid your coworkers will read your code over the bathroom stall wall"?! (paraphrased) Really? Come on.
Write down the code in paper, or write it down on your portable computing device (iPhone, Android, Nanonote, netbook) and when at home, go for it.
Then I read the comments... Really people?
Wow, truly great stuff.