The above, which looks like nothing more than amateur night at your local high school's electronics lab, is in fact one of the iPhone "holy grails" — an external QWERTY keyboard.
Unlike previous attempts, which have relied on serial port access, Perceptive Development engineers Zack Gainsforth and George Dean attacked the problem with an infrared keyboard system that talks to the iPhone using FSK. What's more, it does all this with about US$20.00 worth of hardware, and without the need for installing any kind of jailbroken software.
Here are two videos that explain the whole process:
Perceptive also says they're manufacturing circuit boards even as we speak, so it sounds like this homebrew hardware hack will be available for you soldering-iron geeks Real Soon Now.