Actually, I can believe it. It's a demo, probably very carefully planned - but I can believe the tech.
First, the practical applications of the interface are not the primary concern. Granted, waving your arms around isn't a good interface - but that's not the point. The point is the overlay - positionally aligning 3D objects in the field of view. Having a way to interact with them is also useful, but not in a day to day sense. Keyboards and mice will still win for the standard type of interactions.
Example: if you're walking in the airport on the way to your flight, with handy personalized directions floating in three dimensions guiding you along the way and you get a phone call and choose to ignore it? A quick wave in front of your face to clear the notification is nonintrusive and simple - and you don't look like a putz doing it.
Think about what Oculus is capable of. Then add in infrared mapping a la kinect or a similar technology. And make the overlay transparent, rather than a straight LCD.
Also, that gun was sitting on the desk the entire time. It's a prop, and the system recognizes it. I'd bet it's also an input method, with a trigger if not other inputs.