At first glance, you may think we're looking at a virtualised Ubuntu instance outputting to the HDMI-out of an Android smartphone, but it's actually a little bit more refined than that. Instead, it runs an X server on the smartphone which outputs over HDMI, using the exact same kernel Android itself is running on. Clever (although I'm sure done before).
When your Android smartphone is docked and connected to input devices and a screen, the smartphone will run the Unity interface using the peripherals, fully integrating with Android itself. Ubuntu will tap into the phone's address book, email, music and SMS applications, even going so far as to sending and receiving calls. Browser sessions are shared between the two environments as well, and you can run Android applications in the Unity interface. Heck, even your launcher works in Ubuntu.
This kind of versatility does require a hefty phone - a dualcore 1GHz processor, a shared kernel driver with associated X driver, Open GL, ES/EGLStorage, 2GB for Ubuntu's disk image, HDMI video out with a secondary frame buffer device, USB host mode, and 512 MB RAM are all required.
Canonical's rationale for bringing Ubuntu as a whole to smartphones? "Android is a mobile solution, designed for a touch interface on a handheld device," they state, "On the desktop, where users expect a pointer-driven experience, a PC operating system is essential. Several vendors have tried to bring Android-based desktops or laptops to market, with no success; Android was designed for touch only, and has its hands full winning the tablet wars."
Makes sense, but whether or not users are really looking for such a a converged solution remains to be seen. I think it's pretty cool, but beyond that, I think I'd rather carry my fancy ZenBook around than a separate keyboard, mouse, and display.
In any case, Canonical will demonstrate Ubuntu for Android at Mobile World Congress later this month, and hopes OEMs will line up to bring this functionality to their devices. Well - hope springs eternal.