Let's not forget this video is from a supplier and not BMW. Who is to say the supplier isn't just trying to generate hype about the technology to get BMW to buy it.
I can't really think of an instance where this would be significantly better than the idrive knob. More finger prints on things and less tactile feedback aren't exactly on my want list.
It doesn't automatically have to be more distracting than the idrive though. If all it's doing is replacing the up, down, left, right functions with swiping your finger across the knob it's not so bad. However, I think the knob already does a good job and has an advantage in the respect that you don't have to relocate your hand when you want to navigate and/or select.
Who knows maybe BMW will come up with some awesome application for it we haven't even imagined yet.