It's a Revolution!
Rock on! The Nintendo Revolution controller will allow movement in 3D space. There's all sorts of configurations and movement options, but in the pic above in a FPS, you'd look around by pointing the wand and move using the analog stick. Jumping via the A button (under the right thumb) and shooting with the B button (the trigger under the right hand) and swapping weapons with the trigger button on the left-hand analog controller. One review I read said it felt really natural - I totally believe it. You can detach the analog stick on the left, and flip the controller on its side to use as an NES controller for all the old games they'll have available as well. ROCK!
Check out the video (in Streaming Flash) on this page. It really gives you an idea of how they see the controller being used. Incredible stuff. (And the cable between the two parts is a lot longer than it seems in the pic....)
Very, very, very cool! Way to go Nintendo!