That is for a single, "demo" application - stored in memory only. Once you turn your DS off its gone. This digital distribution thingo (be it a special cart, or a new model of DS) would permanently store FULL sized titles in your DS. They would also be DRM protected, to prevent people copying them to other DS's (although they may come with demo versions that you could upload).
...
Anyway, after thinking about it more - I can't see Nintendo intentionally disrupting the handheld space any further (for now anyway). The market is exactly where they want it to be - easily outselling all competitors with hardware, and killing them with software.
I like the idea of a new/enhanced Wiimote (or some other accessory) more than anything else.