Via the Seattle Tech Report's Microsoft Blog:
You can find the demo code on the Codeplex website. Here is a quote:
"The Touchless SDK enables developers to create multi-touch based applications using a webcam for input. Touch without touching."
"Touchless started as Mike Wasserman’s college project at Columbia University. The main idea: to offer users a new and cheap way of experiencing multi-touch capabilities, without the need of expensive hardware or software. All the user needs is a camera, which will track colored markers defined by the user."
(I posted about the Touchless SDK previously, but I didn't have the video.)