I saw these things at the mall yesterday. I didn't know what was sadder, the line of mouthbreathing cellar-dwellers in line outside of Gamestop to get their Lich King copies or the line of messenger bag wearing hipster douchebags in ironic T-shirts huddled around the Electric Cigarette kiosk talking about how "rad" they are.
My friend sells something like this, except they look much more like cigarettes instead of tiny flute things. He is making a shit-ton of money despite only selling them out of a teensy mall kiosk so far.
That's where I originally saw these. I tried finding a video of the more realistic ones you're talking about but couldn't. The dude on tv said he was opening up 2-3 more kiosks because business is smokin'.