Version: 2.70 official (win 64)
How to reproduce:
Inspect the "Worm" mesh and apply the laplacian deform modifier as a shape key. Notice that applying the modifier leaves behind the messed up basis mesh. The shape key created is relative to that messed up basis.
Technically, this IS the expected behavior! But it's not useful. Applying the Laplacian Deform Modifier as a shape key should restore the mesh to the original shape to which the modifier was bound (in this case, a perfectly straight rectangular prism), and the new shape key should be relative to that original shape. This makes it possible for a modeler/rigger/animator to create shape keys with laplacian deform while preserving the original shape of the mesh.