The way that it works sounds simple (we haven't played with one yet). Just connect the stick and the target iPhone to a computer and run the included software, which pulls all sorts of data from the phone. You'll find deleted texts, calendar events, photos, and contact information. It'll also find recent map searches, locations tracked via GPS, Web history, and voice memos.
Are you scared yet? Don't be. In order to work, the iPhone Spy Stick requires a Windows machine (Windows XP, Vista, or 7 only) and an iPhone that is running iOS 3.2.1 (and earlier). In other words, you can't run it on any iPhone from any machine. That's still some hard core snooping, though.
I love that the manufacturer boasts that the device "Looks like an ordinary USB flash drive - no one will suspect that it's a professional grade forensics tool." I suppose that's in spite of the fact that is says, "iPhone Spy Stick" in huge, black and white letters. You can get yours for US$199.