So it's basically a Gatling style engine.
It would have been great if introduced 10-15 years ago, but as cars and other vehicles are beginning to switch to electric drive a Free Piston Engine Linear Generator is more appropriate for cars as a range extender.

If a large percentage, or at least a majority of cars were now electric, I would agree. But they are not. Because internal combustion engines are still the norm, even in hybrids, making one that's more efficient and lighter with fewer parts is a great idea.
Don't let the great be the enemy of the good.
I wonder how they deal with centrifugal force when it runs at high speeds, it seems like the piston would ride the cylinder wall, creating major friction and heat. Maybe I missed something.

http://en.wikipedia.org/wiki/Revolving_cylinder_engine

Read the last few paragraphs to see that this is basically another "Solar Roadways" situation. E.g. too much hype, not enough practical purpose.

Let's breakdown the problems here: extra complicated machined parts, excess usage of oil (to lube everything up), low rpm and horsepower due to the amount of material needed to move (sure a standard engine might weigh more, but less of it actually moves), additional wear over time, and the potential for explosion with extended use.

Basically, these things are only used in torpedoes, where a massive explosion is the whole point.

Sure, yea, right now it is, but the way things are going it's not far of that a majority of new cars are going to be electric or at least partly electric, especially since this technology is still a bit off.
I like the Free Piston Engine Linear Generator better since it's literally only one moving part (save for the myriad of pumps, valves and other assorted crap all engines have) and has a small size, but it will also be a stopgap measure on the road to pure electric.
And sure this might end up in a few specialized vehicles, but it won't revolutionize anything.

Revolutionize, probably not. Be an improved option over 'regular' internal combustion in (apparently) weight, size and efficiency, maybe. This seems to be a great option for a hybrid. Being smaller and lighter is what you want in an energy efficient vehicle, as is fuel efficiency. Since fossil fueled vehicles will be the norm for the foreseeable future, any step towards making them more efficient is a good thing (although not the end goal, true enough). This seemed to have many advantages of Wankel motors (rotaries) without the efficiency problem due to low compression/incomplete combustion. 14:1 on pump gas is INSANE! My offroad race motor is only 12:1 and it needs trick racing fuel.
Also, as far as simplicity, this had no valves and assorted crap, just inlet and outlet ports (from what I understood anyway) like Wankels. That's a HUGE jump in simplicity, with an entire system eliminated, so there's far less to break/wear out/need tuning. IF manufacturing cost can be reasonable, I see this as a great step forward possibly making hybrids more acceptable to many more people.

I'm not sure how much credence I can give the wiki page...I note it claims things that are obviously wrong, like "the design does not have a long lifespan when compared to other engine designs due to large numbers of moving parts" while in fact this motor has far fewer moving parts than normal motors. It did make some good points, like the first one that occurred to me about friction, but also made some bad points such as claiming 'mechanical complexity' as a drawback, while in fact it seems far more simple than normal motors.
"extra complicated machined parts" also exist in normal motors, and can be made fairly cheaply and easily in bulk.
Excess use of oil is an issue, but one they should be able to solve with proper machining and materials. Low RPM is fine for many applications, like a generator, so long as it's efficient it's fine and might even be better. Since you get high torque at low RPM with this design, low RPM seems to be ideal.
They claimed it had comparable horsepower to the same displacement normal motors in the prototype...if true, that point is moot.
Actually, there seems to be less moving mass in this motor, consider the mass of the crank shaft and counterbalances, connecting rods and pistons, the camshaft, rods, lifters, rockers, and valves. This motor only had a compact 'crank' and the connecting rods and pistons, and the output shaft. That's less actually moving to my eye.
The 'potential for explosion' was claimed on Wiki to be a design flaw of the case thickness around the 'crank', which could easily be thickened if it doesn't have to fit inside a torpedo....potential removed.
I'm not saying it's perfect, or necessarily even feasible, but it does seem to have more going for it than you give it credit for and is worth following it's progress to me.

How is this different, or more efficient, than a Rotary Engine:
http://en.wikipedia.org/wiki/Rotary_engine

(Videosift should add support for HTML links... wait, what?) @dagg

A rotary (Wankel) engine has a triangular device that acts as the piston, which rotates in a chamber close to a figure 8 shape. Each side of the triangle acts as it's own piston as it rotates, first intake through a port (no valve) then compression, detonation, expansion, and finally exhaust through another port (still no valve).
Radial engines (what I think you meant) are relatively normal piston driven engines where the pistons are arranged in a circle around the crank at a 90 deg angle from the cranks rotation. These are usually used in prop driven airplanes.
This motor arranges the pistons in the same orientation as the cranks rotation...a 90 deg difference from radial engines. This makes it far more compact, but also puts the pistons in a single, rotating, revolver like arrangement of cylinders. It's a bit of a combination of rotary and radial engine features.

lol I kept thinking of this video,http://videosift.com/video/The-Turbo-Encabulator , while watching this.