The sensor measures the change in the X and Y axis by taking multiple pictures and using its on-board DSP to determine the movement/change between them. It then stores the data in its memory which is accessed over SPI. The sensor can operate at up to 2000CPI and register acceleration up to 20G's
I have written a library to use with it that makes getting the X and Y movement pretty straight forward. I included some communication examples and the code and 3D models to make your own computer mouse.