This is a rather weird-looking exercise, but it's a very effective way to build the whole deltoid with an emphasis on the lateral portion.
Basically, the movement is like performing a one-arm lateral raise while the other arm is brought up with the elbow bent at a 90 degree angle. The bent arm doesn't do much work because of the advantageous lever, but it allows you to keep some tension on the shoulder muscle during the whole exercise. Constant tension equals more growth!
Want to build great abs? Forget sit-ups. Want great biceps? Forget all those curls. Want a great chest? Forget the bench press. According to Chad, isolation movements are a waste of time. He's either nuts or a great visionary.