The Wiimote has an infrared camera on the front that tracks infrared light such as from the light sensor bar or candles. Johnny Lee demonstrates how he can use the Wiimote, a projector, some homemade infrared light pens, and some code to create an awesome whiteboard on the cheap.
The Wiimote has a field of view of 45 degrees so placement of the Wiimote is key as you don't want to be too far away and you don't want to interrupt its view. When all calibrated, the pen acts like a mouse and you can see Johnny drawing on a projected surface.
Up to four infrared points can be tracked by the Wiimote so you can combine two pens to do a multi-touch setup. Johnny even shows how you can aim the Wiimote at a LCD screen and have it work as well. It looks pretty cool and you can get more info as well as the source code from his website.
