HTC's Droid Incredible features an uncommon method of input: an optical joystick. Unlike a touchpad, the optical joystick features no moving parts or pressure sensors and instead relies on its optical sensor to determine movements and finger position. This technology didn't feature prominently in many phones, and HTC's later Droid handsets ended up eschewing it in favor of multi-touch displays.
The optical joystick is actually a sophisticated optical scanner. Like most scanners, its design enables it to capture visual data, which it then uses for positional tracking. While during use the thumb is often brushed against the scanner, the scanner itself doesn't measure physical contact with the scanner outside of a solid press to select menu items. This, however, doesn't mean that proximity to the sensor isn't important; relative position and proximity are of vital importance to the tracking system.
Position and Tracking
The optical joystick detects both the position of the finger and its angle. By analyzing this data using image processing algorithms, the joystick can interpret the intended direction of the motion and control the on-screen cursor accordingly. With this sophisticated detection system, the finger or thumb used to control the joystick doesn't even actually have to move along the joystick to control movement. Instead, it only has to angle in the desired direction.
Adjusting to Use
The Droid Incredible's optical joystick isn't a commonly used input method and as such isn't one with which most users are familiar. There's a period of adjustment wherein you'll have to master its quirks and sensitivity for optimal results. While familiarity with a small scale trackball system like the one used in the HTC Droid Eris can help make the transition a little smoother, there will still be a bit of a learning curve.
Touch Screen Inclusion
The Droid Incredible's optical joystick isn't the only method of input. The Incredible also features a full touch screen, which lends itself to Android's icon-based interface. It can reasonably be assumed that if you preferred, you could exclusively use one or the other to navigate Android, browsing and some apps. The two could also be used in concert for optimal performance -- the touch screen for general navigation and use and the joystick for precision selection of on-screen links or information too small to be effectively used via touch.