It is done using a special type of liquid-crystal array developed by a British firm called LightBlueOptics, which is also developing the technology for use in tiny projectors (see article).
LightBlueOptics, a tiny technology company in Cambridge, England is developing a portable projector that can turn any flat surface into a touch screen and save our hands the hassle of holding anything.
Come 2012, LightBlueOptics wants to go high volume, selling between 10, 000 and 100, 000 devices the size of a mobile phone, that can project an even bigger image (15 inches wide), and soon after that bring out a device the size of a USB stick.