My guess would be that the pen part of the device is the scanning component of a pen computer (like Logitech io or Fly) which use special paper, each piece of which uses a small domain of tiny dots in a much larger, pre-defined Cartesian universe. When one draws on this paper with a pen computer, the pen scans the dots simultaneously and is able to store the resulting graph digitally for later post-processing (text & graphics recognition, etc). Each atlas page would have to have its own domain of coordinate dots.

As for functionality, wouldn’t it be cool if one could just touch the pen on the atlas page to create waypoints or routes? Trip planning along specific routes is a large pain in the patoot with current commercial GPS packages. My guess is that Kenwood wouldn’t be developing a product like this unless they had partners to develop the paper atlas product. DeLorme, perhaps?