Invalid public key was spent! How was this possible?
That address cannot be spent from and any such transaction that spends from it is invalid. However this does not prevent improperly written software from thinking its private key is a valid private and and performing the elliptic curve operations on it. So thus the address was created and a transaction was created that appears valid. But when validating the transaction with proper software, such software rejects it.

This transaction appears on blockchain.info likely because their software is either improperly implemented or simply not validating (or fully validating) transactions. This isn't the first time that's happened though.