I like this. I am much better with visuals than with numbers and such, so I suspect that such gestures would make it easier for me to remember the pass to sites.
And it's cool that after initial login, it remembers all the passwords for protected sites, but you can loan the iPad to others without concerns because they have to make their own initial pass gesture after you have logged out.
The PassTouch site points to the free, ad-supported version, but there's also an ad-free version for five bucks currently. Sadly the browser seems to be lacking modern amenities like tabbed browsing and changing text size though.