It seems like a more reasonable way to control than the four-way pad + four button arrangement prevalent on most PDAs and cell phones (although ideally I would prefer a tilt-sensor for a virtual-cockpit arrangement, with a button to press down whenever you want to look around so every little jolt doesn't pull a Linda Blair.) Alrthough, really, pretty much anything is better than the former - even the typical elementary NES gamepad isn't that well suited to this sort of thing; Prophecy GBA's controls were *okay*, but even ignoring the macros needed to pull the more advanced features there's still room for improvement. For one, the eight-way direction pad isn't a real mini-joystick; it only goes direction yes/no, with no way to pull a hard jink from one side to the other, for instance.
The iPhone-type multi-touch-screen idea or such has an idea here with the way finger-touch velocity affects movement, but I don't want to have to block out the screen whenever I want to move. I've heard of concepts placing touchpads on the *back* of devices, so the screen isn't obscured for this sort of thing - that could be promising.