Your eyes aren't deceiving you, that's a touchscreen being tracked through water.

Minamo, the water-based touchscreen, is made from a webcam, LCD, light, and a tank of water. Basically the light shines the water's surface while the webcam tracks the surface from underneath. So when something, like a finger, breaks the surface, a color tracking system on Max/MSP+Jitter finds coordinates where the finger appears and delivers them to LCD.

This could have some potential, if our phones worked underwater. [Taichi Inoue via Makezine]