You would think that companies would have a buffer to keep that from happening. They can dim a screen to protect your monitor, but no way to keep a speaker from blowing?

Probably they don't blow. My guess is that they are burning out or having mechanical failure from the heat produced by unnaturally high average amplitude. I heard that one of the Dell laptop models got a BIOS revision to help protect the speakers from the VLC Player but I don't know how such protection could work except by lowering the overall volume.

I played some short samples of a pop tune with VLC Player and simultaneously recorded them into a graphic audio editor, and made some screen shots of the amplitude waveforms -- just the left channel to keep it simple. These amplitude graphs represent the relative energy of the audio signal. The highest peaks represent the greatest amplitude, which increases as the waveform moves away from the center crossing line in either up or down direction. The center "zero crossing" line represents silence.

Example 1 shows VLC playing the tune normally with its volume set at 100%.

Example 2 is VLC Player playing the tune with the volume set to 200%.

In both examples, the maximum amplitude of the signal is nearly as large as it can get, which is the saturation point of 0 dB (zero decibels). The 2nd example would sound louder because its average amplitude is greater. That is shown in the graph by the increased density of the waveform. A greater proportion of the signal is close to 0 dB.

VLC can't make the laptop's amp produce more wattage than it was made to produce, so where does the increased volume come from? The program seems to increase the signal's amplitude to beyond the 0 dB limit -- super-saturation. That would definitely increase the volume but the problem is that signal over 0 dB create very blatant digital distortion -- basically a loud noise. To fix that, all of the signal over 0 dB is simply chopped off, or clipped.

Example 2 shows the increased average amplitude but with a form of distortion known as "clipping". It is called "clipping" because of the way the graph looks after parts of the signal have been hacked off. It is a form of distortion because the waveform has been ruined by hacking off parts of it. If you play a song with VLC Player set to 200% volume you can easily hear the distortion in the audio signal.

Here are very extreme close-ups of examples 1 & 2. The waveform in example 1 resembles a sine wave more or less.

Example 2 is the same slice of music but with VLC Player's volume set to 200%. The maximum amplitude is the same as in example 1, but now there is much more of the signal near maximum so the average amplitude is much greater here. In example 1, the waveform was forming peaks near the maximum. In example 2 the waveform is creating plateaus near the the maximum, which means that it is now starting to look more like a square wave -- typical of hard clipping.

The maker of VCL Player says there is nothing about the player that can cause damage to laptop speakers, and for all I know that may be true. Those guys are smarter than me. However these graphs demonstrate that the player creates hard clipping when the volume level is set to 200% and dramatically increases the average amplitude.

The graphs actually under-represent the increase in the amount of average amplitude between example 1 and 2. That is because the graphs represent amplitude in decibels, which is a logarithmic scale. If the graphs accurately represented the increase in amplitude they would be too big to use. The bottom line is that there is a whole lot of extra energy for the speakers to have to convert into mechanical energy and heat without breaking down.

Wikipedia has an explanation of why hard clipping can damage speakers in its article on audio clipping. It also mentions another problem with hard clipping that can destroy speakers, upper level harmonics, but that is probably not the main concern.