I saw this product and absolutely loved it! Sometimes toys are the greatest source of inspiration and innovation.
Nerf has never been high on my list of innovators but this product does several things well. According to Kotaku, the product is "probably intended for EA's upcoming Nerf N-Strike title". This blast combines a fully functioning Nerf blaster with the ability to turn into a Wiimote for the game.
What makes this great is the ability to translate a real-life behavior into a virtual one. Nerf is a fun toy, but quite often lives within a fantasy world. The ability for a product that can stretch between real and virtual adds a tremendous amount of depth and meaning to the product. Giving it the ability to be a peripheral for other games adds even greater functionality. Peripherals have never been hotter (guitar hero, rock band), but this is a first giving it physical world benefits.
Given the change in the nature of kids behavior, catering to a virtual crowd isn't a bad step, in fact its probably better to face the music these days. This does a great job in bridging that gap, and it could even work in reverse and get some kids to get out and play. This creates more occasions for usage based on kid's current behaviors.
One of the biggest challenges of virtual worlds, software or sites is translating into real behaviors. In the future we can expect RFID chips and all sorts of E-hancements to mix the virtual and real seemlessly. I just never expected to it so soon in an foam toy for kids.