The biggest thing keeping the iPhone from rendering the Nintendo DSi and Sony PSP Go obsolete is its lack of physical buttons. You just can't play some games with a touchscreen. And this wacky iHandstick does nothing to solve that.
Instead, it pops the iPhone or iPod Touch into a Playstation-like grip, allowing you to hold it like a controller you're used to. But the controls will remain the same, and will maybe even be harder to manipulate when holding it like that.