This is basically a jailbroken iPhone running some third party applications (that Apple would not be too happy about) which allows it to be controlled by a WiiMote. Here’s what the video’s author, ZodTTD, wrote in the description:
“In this video I modified my mame4iphone release (available via my Cydia “Community Source” repo) to support a WiiMote controller via BlueTooth. This was able to be done by using the BTstack daemon which is also available via Cydia.
Note that I’m using an iPhone 3gs. You will need a device that supports BlueTooth such as an iPhone or iPod Touch other than the first gen.
I decided to use the buttons on the WiiMote for the video instead of it’s accelerometer. Both are a bit tricky to control. I’m looking forward to getting the PS3 controller working with my emulator releases next.”
If you want to keep up with ZodTTD’s experiments on the iPhone, subscribe to his YouTube channel.