It loads a json file [1] that contains the co-ordinates of the tip of each point and the corresponding image. It uses this to create a Voronoi diagram [2] using a "custom Javascript implementation of Steven J. Fortune's algorithm" [3].
Another cool thing is it appears to scale/move the image to match the desired point, at least in some cases.
Try moving your pointer around to different positions very close to the top right corner. This triggers a picture with a wristwatch and water bottle. The pointing is done by the right hand, which if your pointer is too far right is cut out of the frame, but becomes visible as you move towards the left.
I was just about to mention this; the same thing happens in the lower left corner (woman pointing, with two men in the background, one holding a beer can and wearing an 'enjoi' hoodie). The picture gets moved so she's always pointing at the cursor on the y-axis.
[1] http://www.pointerpointer.com/gridPositions.json
[2] http://en.wikipedia.org/wiki/Voronoi_diagram
[3] http://www.pointerpointer.com/js/rhill-voronoi-core.js