I'm pretty sure EEG's never gonna be good enough for the kind of cursor control gamers are thinking about. People have been trying to work with the signals for a long time, and even though they can get crappy 2D control now, the signal to noise ratio is just too high for anything much better.
Whoops, looks like I misremembered - the patient in that movie wrote by blinking at a grid, not via P300. My bad.
This system has been around for a while; I've seen it demonstrated live twice, and it didn't work at all either time. In my opinion, even in best conditions (bald patient, shit-tons of electrodes, professional setup, well-trained subject) it doesn't work well enough to fuel science-fiction fantasies, and probably never well. For locked-in patients, who can do nothing but move their eyes, though, it's an awesome technology. They made a movie recently about such a patient who spent years using it to write a novel: http://www.imdb.com/title/tt0401383/.
Here's how it works - metal electrodes on the brain (EEG) pick up an analog signal, and *any* stimulus which is particularly salient to a subject creates a spike in the signal 300ms after that stimulus appears (this spike is called the P300, there's a good wiki article on it). If you have a dude staring at a grid of letters, you can tell which one he's looking at by hunting for the big spikes 300 ms after the right letter flashes. The only problem is the signal-to-noise ratio, which is notoriously terrible in EEG, though of course there are people out there working on improving it.
Arithmetic is being able to count up to twenty without taking off your shoes. -- Mickey Mouse