What you see here is Forcetek's Xio arm-mounted controller, which is slated to come out for game consoles sometime next year. So, the motion-controlled offerings by Sony and Microsoft — the latter of which does away with the controller entirely — make half of the "wow" factor here obsolete. What's it got left? Force feedback all along your arms.
The technology behind the Xio arms actually come from the world of physical therapy, and it's only the start of the kind of rig Forcetek wants to put together. In the end, the company would like to have a full exo-skeleton-style setup.
As you play, the controller provides tactile feedback given what's going on in the game. It should work more or less right out of the box, though the game won't be able to rumble your arms in any specific way. Developers will be able to go in and add extra support for the Xio arms, though, really, while the arms are cool, it's a longshot betting that enough players will buy a pair for that to be worth it for developers.
Down below is a video of the arms in action.