|satellite image of Iceland|
The app is based on the Islendingabok ("Book of Icelanders"), an online database of residents and their family trees that goes back 1,200 years. The database was created using information from censuses, church records, family records, and other sources. The company that developed it claims it includes 95% of all Icelanders who have lived in the past 300 years. The database is available to any Icelandic citizen or resident; the app makes the database accessible from a smartphone. When two people with the app "bump" their phones, the app tells them their family connection. There's an article about the app at Huffington Post.
I suppose if we ever get to the point where everyone's family tree is online and connected (pretty much what the LDS Church is aiming for with the new Family Tree) non-Icelanders will be able to do the same thing. That's probably a long way off for the rest of us, though.