These sights are used with really long telephotos to make target acquisition easier. Some big telephoto lenses come with an external sight of some sort for this purpose, and it's common to see something similar on stargazing telescopes.
The actual name for this type side is ACOG or Advanced Combat Optical Gunsight. It's essentially a small rifle scope, with low-power 1X to 4X magnification and an illuminated (usually, but not always red) dot or other type of targeting reticle in the center. These are popular for use on AR15 and AR10 type rifles and the smallest are roughly 4 inches long and around 1.5 inches in diameter. The prices range from under $30 for a BSA, and up to $500 or even more than $1000 for a top-of-the-line Trijicon.
RED DOT ACOG:
http://media.midwayusa.com/productimages/880x660/Primary/537/537764.jpgThere are also red dot "reflex" sites, which are smaller, lighter, have little or no magnification and a more open design, that aren't as precise but allow for quicker target acquisition. Reflex red dots sell for a similar, extremely wide range of prices as the ACOGs.
RED DOT REFLEX :
http://media.midwayusa.com/productimages/880x660/Primary/194/194879.jpgAbove reflex type has minimal mounting ring to intrude on one's vision as little as possible. There are also more hooded designs that are a little better protected, though there's a little more intrusion on your vision.
HOODED RED DOT REFLEX:
http://media.midwayusa.com/productimages/880x660/Primary/786/786781.jpgHaving used both types of red dot sights on rifles and shotguns, I'd recommend one of the Reflex type as more than adequate for photographic purposes, faster and easier to use, as well as and smaller and lighter than the ACOG style sight. The reflex type have unlimited eye relief, meaning that they you don't have to have your eye positioned carefully at a certain distance to see clearly through them. With the ACOG type, eye relief is typically more limited (and even more limited with higher magnification, and/or more limited with less expensive optics).
Both types of sight most typically use standard Weaver/Picatinny type mounting systems. They clamp onto a slotted rail, that first needs to be installed on the rifle (or camera's hot shoe in this case). The special rail needed to mount one of these sights in a camera's hot shoe is what Photosolve is selling for about $27.
After mounting, both types of sight have to be "zeroed" in with elevation and windage adjustments. How this is done varies a little from one brand or model to another. But it's usually pretty simple.
Most of the more affordable of both types of sights use a standard lithium battery (often CR2032 or similar) to power the illuminated red dot. There are some passive models that don't need a battery, but they tend to be considerably more expensive.
One thing I'd suggest is some caution when using these. The protruding sight on top of the camera would be easy to catch on a branch, possibly doing damage to the camera's hot shoe.
Also note that you won't have use of the hot shoe for flash, while using one of these sight systems.