At first I had absolutely no idea what was going on in this video. But eventually it made sense; and when it did, I actually thought it was kinda cool. What you're seeing is a hybrid between art and programming, and it's called illucia.
Chris Novello (aka paper kettle), the artist/programmer behind illucia, created a custom-built USB controller and a series of programs that contain "patch points" (code that allows the user to control any piece of software in the series with any other software in the series). For instance, if a music player and computer are connected to the device, a song can write words in the computer's word processor.
Novello says a number of games and software involving "patch points" will be released in a couple weeks and will be free for download. Have fun!... If you can figure out how to use the thing. [Creative Applications, vimeo]