Basically, it's an alternative to the keyboard. I don't just mean that it's an alternate keyboard; it's not even a conventional gesture-based keyboard like Swype. Instead, it's a radical but pleasantly simple gesture-based rethink of the *notion* of the keyboard, predicated on the notion that trying to using an approach designed for a 12-inch-wide surface in 1.5 inches is kind of daft. I do recommend the video they show on the site -- aside from the fact that the chirpy voice is eerily reminiscent of Portal's, it does a nice job of concisely making its case.
After using it for a few minutes, I'm guardedly impressed. Its main problem is learning curve, which is made much worse by a subtle design issue. The way you say "space" is by lifting your finger (part of the idea is that you do an entire word without lifting) -- but without lifting your finger, it's kind of hard to see some of the characters, so you don't know what to do. I suspect that's completely a non-issue once you're comfortable with the thing (and I do suspect that most of the learning curve is in the first few hours), but I suspect some people will find that initial stretch a little frustrating.
Also, while I think they've got a lot of things right, I don't think they've quite perfected the model yet. For example, there's a nice big backspace key -- but to use it, you have to lift your finger, which inserts a space, so you always have to backspace *twice* to correct a mid-word mistake. Indeed, I'd generally say that the buttons are the weak spot: they violate the "don't lift your finger" model that the system mostly follows.
Neat bit of lateral thinking, though, and it seems to work pretty well -- after just 15 minutes, my typing speed is increasingly markedly. Nothing even remotely resembling my speed on a Real Keyboard, of course, and I suspect it'll take a while before it even reaches my speed on the Droid's hardware keyboard. But it looks likely that it will eventually be much faster than either of the two keyboards built into the Droid.
(Oh, and the obvious question: yes, it's kind of all-or-nothing. Once you turn 8pen on, it's *the* keyboard for your 'droid. But it's pretty easy to turn off again, in the system settings...)