In general, devices with touchscreens are intuitive, but not always convenient. Sometimes there’s just no substitute for an actual physical interface. For example, the possible motions for rotation on a touchscreen are awkward, whereas if you had a knob you could easily perform rotation. The folks at dsLabs tried to come up with a solution to that problem – a touchscreen knob.
As you can see their design is a bit crude – they had to make sure that current from the fingers still gets to the touchscreen, hence the need for the conductive material. But they also realized that they didn’t have to add conductive material – you can use an ordinary knob and “grab it such that your fingers actually touch the screen making it nothing more than a physical prop to provide some tactile feedback.”
As some of the commenters on Vimeo said, the knob would help not only with manipulating images but also with controlling music apps or any other app that will benefit from knob controls.