I did extensive research on this thing when I was doing my last start-up. It's a clustering engine, but it is limited in that it is specifically tuned to cluster search results. For example, it returns poor clustering results if you input a set of long text documents; it works much better when its input consists of a query string and a set of titles and short snippets.
both are smart. i definitely agree that this is the first search visualization that looked like more than eye candy. i mean, it is fun to use, but it also seems to be useful.
impressive user iteraction, and fake queries seem to return good results. i'll use the engine throughout the day and see if the results are good 'nuff.