image from Jeff Han
Jeff Han's LED touch-sensing video can be seen here:
http://cs.nyu.edu/~jhan/ledtouch/index.html
Here is an article worth reading: Dietz et al, MERL
And this was a frustratingly dead link which purported to show a schematic, then I found an archived version here: ...motestruments.com/led-touch-sensor-circuit/