It uses a handheld computer (a tiny Sony Vaio running Windows XP) that has a digital compass attached to it. The player wears a pager-sized clip-on device on his belt that contains an accelerometer and a wireless link to the handheld computer. The premise of the game is that you are being chased by zombies. You can see them on the display. You have to run away from the zombies by actually running in the room you are standing in. The accelerometers and digital compass figure out where you are and map it to the game world. It's incredibly fun!
The guys who invented it — William Carter and Aaron Meyers of USC — also gave me a cool Mobzombies T-shirt. You can buy one for $11.