The day before Hack the Brain, I attended the workshop on BCI tech hosted by g.tec to get a better idea of what is going on (alas, I am not a brain scientist). I admit I wasn't too terribly impressed at first. The presentation was delayed over 30 minutes (not uncommon in Ireland), and the projector screen didn't work at first, and then the presenter's mic was super quiet.
However, it eventually paid off because there was a wicked awesome demo of the intendix speller software. We also got the low-down on different types of headgear; g.tec uses a cap, with the nodes affixed by gel (gets in your hair - fun!). Essentially, what the speller software looks for is the p300 brainwave and memorizes its formation for different letters.
First the software has to be trained. Basically, it will pick a letter and the user has to concentrate on that letter for at least four "flashes". The software will alternate between flashing the letter and flashing a picture of a celebrity. The software memorizes the shape of the brainwave each time the letter flashes onscreen. Apparently flashing to familiar faces (like celebrities) instead of flashing to a black screen helps the process.
Then, after being calibrated, when the user concentrates on a letter of their choice, the software recognizes which letter by the shape of the P300 brainwave. Thus, the user is able to spells words just by thinking of the letters. Here's a very short video of someone using the software. It's pretty neat! Look at how fast the flashes go!