The key to touch-enabling very small devices is to use touch on the device backside. In order to study this, the authors have created the 2.4" prototype device shown in the video. They use the device to simulate 2.4", 1.2", 0.6", and 0.3" devices controlled using back-of device interaction. This worked well, while a comparable touch screen interface failed. The reason is that the user's fingers occlude screen contents on regular touch screens, but not when interacting with the device backside.
The key finding of this demo is that back-of-device interaction allows making very small touch devices, such as the pendants, watches, and rings briefly shown at the end of the video.
Project headed by Patrick Baudisch and Gerry Chu at Hasso Plattner Institut Berlin/Potsdam and at Microsoft Research.