This is probably the first really innovative, cool thing that I have seen in a while. The wireless sharing is way cool, much better than using the shitty cellphone controls to send a photo to the person sitting next to you. This can easily be extended to music as well, to the dismay of the RIAA. Drag the cover of the latest greatest album to your friends ipod, and bam, transferred. The key here really is the UI, if they can pull off something really good, and make the whole experience as natural as the few things they showcased in the video looked, then it could be a wonderful product. People could pick it up right away, way more user friendly than a mouse / keyboard.
There are some other cool things I can think of.... ever see one of those fully customizable multi-hundred dollar remote controls? Pack it into this and the user can control all their tv, audio equiment from a central console. Hell, what about x10 stuff? Control lights, thermostat, CCTV style cameras, security system... the possibilities are endless! But with something like that, security is probably a nightmare, and this is a microsoft product so... yeah.