Sparkle is one of three tools that form the Expression suite - the other two tools today being a Web Designer for HTML, and "Acrylic" for vector/2D/bitmap gaphics. I suspect a forth photo/image editing product will come out at some point, but who knows?
Sparkle itself is written entirely in .Net using XAML (I don't think Acrylic or the web designer are). Sparkle is therefore a showcase of the kind of app you could build using the .Net/XAML platform. (Imagine trying to write the Flash authoring tool in Flash, for example - you'd run out of steam pretty quickly).
In this one hour video they really hardly scratched the surface. They didn't show how to make a custom reusable control, or how to create a style, or how to handle rich text. I'm sure these are things that Sparkle will excel at.
I wrote a short post on Sparkle over at http://www.cybergrain.com
Now we just have to wait until it appears in the stores