It is nice but I do wonder how much CPU overhead that takes up.
Not much actually: it's the same concept behind motion tracking for webcams (for 3D avatars and props on your face) which has been available for a lot of time.
Besides the ambient light problem mentioned by FlameDuck (playing with the eyetoy with artificial light is often impossible, but tracking softwares for webcams are usually less demanding and here you use an uniformly colored object), I also wonder how well it reacts to depth: the demo only shows movement on two axis most of the time, and an airplane where he moved his hands forward and backward for the pitch (which is quite different from tilting a joystick).
A cool new technology, which I'm sure someone will be along in a while describing as "a gimmick" is going to have one rough time penetrating the market.
That's usually the biggest obstacle for PC controllers. Since consoles already ship with a controller, it is a standard. However, PC's usually ship with mouse and keyboard only, and even though many of us have a webcam, developers don't want to limit their market (the demonstration is that even joysticks have disappeared during years, and games making good use of them altogether).