It's an oyster card elastic banded to an ipod touch. Oyster card technology is pretty small in fact so it wouldn't take much to put the chip inside the ipod and do away with the elastic band. Then once that was up and running you'd have a brand new payment channel, the best thing since the invention of visa card (or the invention of visa card with a built in oyster card).
Think about it, apple are making a mint from micro-payments on music and apps with itunes at the minute and people are getting more and more comfortable with these transactions (I've personally spent over £30 in £10 or less transactions on itunes in the last 30 days). And Oyster has the very realistic potential to expand out of purely London travel transactions into a whole host of small to mid size payments just has has happened with Hong Kong's Octapus card. Like Oyster have just started to do with Evening Standard offers.
And combining both would also give users the opportunity to life track their spending via specific applications like nike+ but for things you buy. Which would be fascinating I think.