Presumably, this is how it tells which note you are playing. Pressing a string to the fret completes an electrical circuit. At first I thought the bridge had optical pickups based on the way it looked, but according to the description, the thing has no pickups.
There are some serious flaws with this design.
1) It looks like you can't bend strings, because the frets are divided into six segments. The string would get caught between the segments. If there's some kind of non-conductive bridge between the segments (unlikely), then it will probably wear differently. If you can't do a whole-step bend, then there's an enormous volume of music you can't play.
2) It's going to sound like trash. Without pickups, it has to synthesize the sound. I've gotten usable sampled guitar tracks before, but I did that by recording samples specifically for the song and manually tweaking each note.
3) It's unnecessary. You could basically take a stock Stratocaster, add a hex pickup and a LED neck, and you're done. The LED neck isn't easy, and of course it won't sound like a normal neck, but whatever. The guitar will still be a normal usable guitar.
If you want to divide guitar players into rhythm/lead and acoustic/electric, it becomes clear that this is a usable instrument in none of these four categories. Electric rhythm guitar strongly relies on palm-muting technique which you won't be able to learn without regular pickups. For electric lead, you need the whole-note bend and left-hand vibrato technique. The bend is impossible and the vibrato can't be taught without the pickup. Acoustic players want to be able to play and hang out with friends but the synth is just going to get in the way. You see the picture of that guy at the park with three friends (of course the two sitting next to him are girls)? He would probably be happier with an acoustic. Furthermore, if you learn on this guitar you'll be fairly hopeless on an acoustic since the strings are heavier (if you play electric and switch to acoustic, your left hand will give out fairly quick).
Incidentally, I paid about $330 for my first guitar, a Fender Stratocaster, plus amp. It's more like $400 with inflation since 2003. Never had lessons but it sure ain't hard to figure out "Smoke on the Water" or "Smells Like Teen Spirit".