At first I thought this system may have used a camera that watched the movement of an object and sent mouse like coordinates based on the movement. Turns out that after having a look at the patent the NaviSense system uses ultrasonic technology to track your finger. It looks very impressive but I would have to use it to be convinced.

"The iPoint™ is a small motion sensing mouse device which mounts to the keyboard or computer. Alternatively, the device can be integrated within laptops or notebooks. A user typing at the keyboard raises a solitary finger thereby gaining control of the cursor on the display. The cursor moves in accordance with the movement of the user’s finger. A first finger movement acquires navigation control of the cursor, and a second finger movement activates single and double click behavior. An ultrasonic sensor device for short-range detection, comprising: a pulse shaper for producing an ultrasonic chirp signal with an amplitude modulated region and a frequency modulated region; at least one transmit sensor operatively coupled to the pulse shaper for transmitting the ultrasonic chirp signal, the ultrasonic chirp signal intended for reflecting off a finger to produce a reflected chirp signal; at least one receive sensor for receiving the reflected chirp signal; a phase detector for identifying a relative phase of the reflected chirp signal from the frequency modulated region with respect to a frequency modulated region of a previously received reflected signal, and a processor coupled to the phase detector and the receive sensor for identifying a location of the finger from an arrival time of the amplitude modulated region of the reflected chirp signal and a movement of the finger from the relative phase of the frequency modulated region, and providing control to a user interface control in accordance with the location and the movement of the finger."