Interesting. Since there is, to my knowledge, no barometer on an iOS device yet made and the demo was inside I'm guessing he is using the accelerometer sensors to infer velocity (by integration over time) at least for short periods, but that is subject to drift and integration errors.
Regardless of how it performs I think it looks nice and more apps like this and Gaggle is good as it will create competition and fuel some innovation and price changes in the lower end of the navigational aid market.