This is Spinning Vinyl, an application that changes the speed of an MP3 song as you twist an iPod touch. It works like a turntable, changing the speed depending on the revolutions-per-minute.

However, it will only work right in the iPod touch. According to its Theo Watson—its creator—only the curvature of the iPod touch second generation allows it to work right. I wish it could also scratch the album, like a real vinyl. Then I would buy it, if it ever gets released in the app store. [Spinning Vinyl via Hack a Day via Nerdcore]
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Theodore Watson has created a program to play a song as if it's in a turntable,