Until now interacting with Android Wear smartwatches has been done with voice commands. Seeing this isn't ideal in all situations Microsoft created a wearable keyboard for the wrist.
Android Wear connects to Android smartphones and allows basic controls of apps including replying to messages. At the moment the only way to reply is to use your voice to dictate a message, this can sometimes be inaccurate or not possible, depending on the situation. That is why a keyboard, that can be wrist mounted, could be of use.
The Microsoft keyboard is described as analogue since it requires the user to draw each letter on the screen using their finger. While that will take far longer than simply speaking the command, it is a helpful alternative when in a situation where talking is awkward, like on a train or in a meeting. Of course you could always take your phone out.
If an Android Wear keyboard from Microsoft seems odd it's not Microsoft commercial, it's Microsoft Research showing off what it can do.
The Microsoft keyboard app works with square faced Android Wear devices of 320 x 320 resolution and also works with the round Moto 360. The app is available to download now, for free.