Such an option is usually designed to assist those with physical or mobility diabilities. With the setting turned on in iOS 7, users can access the home page, select apps, control an iDevice's volume, and more.
Still, as reported, it's not the easiest thing to use. When on, the feature -- which leverages an iDevice's front-facing camera -- responds to left and right head movements by automatically running through every option on the device screen until the user selects the desired one by turning -- in the video, one would say "jerking" -- his or her head to the left or right.
Although time-consuming and tedious, one can see it could have a number of applications. If Apple provides appropriate APIs, it's possible this sort of functionality could be used outside of simple accessibility. One could imagine it being used in video games or in other ways.
These sorts of motion control options are showing up in other smartphones, already. Samsung's Galaxy S4, for example, included a section in its Settings app called "Motions and Gestures." Users can enable the setting and use hand motions to, for example, scroll browser pages.
Other functionality includes having the device respond to certain activity, such as lifting it to your ear. There is also functionality that relies on a user's eyes, such as Smart Pause, which pauses video playback when a user looks away.