While at the MIT Media Lab earlier this week, I met David Cranor, a student in the Object-Based Media group, who showed me his LilyPad Arduino secret handshake project he made with Amanda Peyton, Arlene Persaud, Rajiv Bhatia, and Sinbae Kim for their Tangible Interfaces class last semester. He writes:

We ironed on conductive fabric pads on different parts of the gloves, and read them off like a multiplexed keypad. The pads on one glove are the rows and the pads on the other glove are the columns, and strobing rows and columns sees what combination of pads were connected to each other). The LilyPad then figures out what gesture is being made and transmits a number through serial to a Processing program which displays the gesture on the screen and checks for the correct pattern.