This application isn't intended as complete soft keyboard - yet - and in its current form it's pretty light on features. This does at least have the advantage that it's simple to use.
This demo was designed to mimic the layout of the G1 keyboard to minimize the learning necessary for people using that phone. Just hit the key you want to start typing. Use Alt and Shift as you would on the regular keyboard.
Don't worry too much about making mistakes as you type; as you type your word, the application will try to guess what you intended to type based on an internal English dictionary. After you have finished typing a word: if the word you intended to type is being displayed in the letter bar in the middle of the screen, just continue to type; the corrections will be made automatically. Otherwise, the word you want may be available as an alternative correction via the down arrow on the left. If you typed the word correctly and the proposed correction is wrong, just press the "ABC" button on the right.