Theatrhythm has three different kinds of levels: field, battle, and event, each built around a song from that part of a Final Fantasy game. For example, you can play a "battle" level along with Final Fantasy 1's battle theme. Each one has slight variations in the basic gameplay (which, in simplest terms, is tapping circles and tracing lines with the stylus). In "field" levels, you tap circles and hold them to trace lines as they rise and fall on the screen, presumably representing traveling over hilly terrain. While this is going on, your selected Final Fantasy character (say, Lightning) walks from right to left in a side-scrolling version of a world map. As you do well, you'll be given treasure chests by moogles, get a chocobo to clear space faster, and other bonuses. If you trace outside of the line by accident, your character will blink out and be replaced with another party member.
"Battle" levels have notes coming from left to right in four lines, each one lining up with a party member in a classic FF1-style battle. You simply tap (or swipe, depending on the icon) in time with each note to battle a procession of cute, familiar enemies. Excellent timing is rewarded with critical hits. At one point, I was doing well enough (I guess) to be able to summon Ifrit -- I assume other summon monsters will appear outside of the demo. Not that it mattered; interaction with the game was identical whether I had my party or a summon fighting.
"Event" levels play cutscene montages from a game -- Final Fantasy X in my demo -- to the tune of the matching song. Here, the notes appear in geometric arrangements, reminiscent of the Sphere Grid. This isn't terribly relevant to gameplay, since you just tap anywhere on the bottom screen to hit them. But it looks nice!
The best thing about Theatrhythm, obviously, is the music. Final Fantasy's music is one of the best-loved things about the series, and it's all presented here as it was in the original game. So the NES Final Fantasy games have NES music, and the PS2 games have orchestrated, vocal themes. As someone who would buy pretty much any music game with NES music in it, I can appreciate that on a few different levels.
The problem, though, is that the gameplay doesn't really change that much. Superficially, the notes come at you in different arrangements in different levels, and sometimes you're tracing a line or swiping in a direction instead of just tapping, but in the demo it felt like nothing happening on the screen had any effect on gameplay other than the stream of notes. If, however, all of those summon monsters and chocobos and treasures and stuff turn out to have relevance in the game, I could see myself getting hooked on Theatrhythm.