A squishy material just softens the impact by slowing the deceleration of your momentum. The problem is if the impact force is high you need a lot of padding to soften the blow. By turning solid on impact you material instantly distributes all this force over a large area i.e. all the force isn't released on e.g. the corner of your laptop causing it to shatter. This is similar to putting a hard cover around your object (like a motorcycle helmet). The advantage of this material is that is is flexible in it's normal state so it can met integrated in clothing etc without limiting movement.

This video has a great example: http://www.youtube.com/watch?v=JceDaEMIHKE&feature=related
They use a cap with the material to protect a watermelon from impact with a hammer. With a normal squishy material you'd need a really thick layer to soften a blow like that and a hard material would restrict movement.

It's a kind of best of both worlds solution.

that's what google paper is for