I think it's an interesting approach. There are some things you can do with a projector that you couldn't do with another screen (http://www.youtube.com/watch?v=j9JXtTj0mzE)

I could see some applications taking advantage of this when it comes to working with physical items

I was also quite confused about why they would choose a projector over a second screen, actually it was the most nagging question until, watching the intro video, someone projects a graphic onto a physical sheet of paper, so I suppose the immediate interaction between projection and physical objects is the main reasoning behind it.

In a two screen scenario, I suppose the user would have to image the paper, then composite it digitally. It's an interesting approach although I wonder how often it would be used.

Presumably, if you're reaching across the pad, you're looking at the monitor, and if you're touching something on the pad then you probably can't see through your arms/hands anyway.

That being said, I think a second screen would be preferable all the same, but it would probably bump the cost significantly.

Screens are [comparatively] cheap, esp. Vs a custom projector + touchpad + 3d camera set-up. I don't think they went this route to save on production costs.

When you have a physical 3-dimensional object you can use the projector cast images on it. I wonder if it is used for calibrating and lining up objects for the 3D camera as well.