The effect allows the user, on their iPhone, to tap or drag along the surface that it's projected onto. When you tap or drag, the surface will seemingly rise, fall, and squirm to your desire. It creates the creepy illusion that the surface has come alive or that there's something alive running around beneath it. Who knows what other surfaces this could be used on?
While there may not be too many practical uses for it, this effect does have the potential to create some awesome, disturbing special effects.
Check out the full video here.