It reminds me of early approaches for robot walking, which tried to plan everything out, and more recent approaches of incorporating feedback - which turned out to be much simpler and work better. Sort of waterfall vs. agile.
It seems a tad unreliable (his "mouse pointer" was lost a few times while still on screen), but this is still a prototype. It's really impressive how the panda was tracked in 360 orientations - probably helped by the distinctive colouring.
New input devices (this, kinect, multi-touch) and applications that can really use them, may be a main source of disruptive innovation in computers for the next decade or two.
The tracking improved during the mouse pointer example (which I found incredibly impressive). The point he was making during that example was that it learns the different scales/rotations of objects on the fly and tracking improves automatically.
btw: my comment originally included praise for his work - but I thought his merit was obvious and that it distracted from my comment's point, so I deleted it. Instead, I'll just note that the first telephone also had lots of room for improvement - practically, the first of anything does. The cool thing was the idea of the telephone, and then making it real. How good it was is irrelevant compared with that it became real. It doesn't take away from the immense task of doing something that had not been done before or even imagined. Quality is not as crucial, because once you have the basic thing, it's (relatively) easy to iterate to improve it. I think having the idea and making it real deserves far far greater admiration than the quality of the prototype algorithm and implementation. Just as with the telephone.