Here is my rough explanation of how noise cancellation works. I'm not hot on the physics of audio, so techies, feel free to correct me!
The google Nexus 1 smartphone has two microphones on it. The one for your voice, like any other microphone, picks up all the sounds coming into it. That means it receives your voice plus any background noise.
The extra microphone is positioned to pick up background noises MORE than your voice. That means it will be aimed away from your mouth (on the other side of the handset, I presume).
So there are two audio signals going into the phone, with some pretty much identical audio content (i.e. the background noise).
Basic noise cancellation involves taking two signals, inverting the phase of the waveform of one of them, then mixing them together. One waveform goes "up" and an identical one goes "down" (because it's been inverted). That way, the downward waveform "cancels out" the upward one. If both signals are identical, you get silence. If the two signals are virtually identical (as is the case with two mics at slightly different positions) you get a reduction in the volume.
It's only the bits of the audio which are different in the two mics (primarily, your voice) which don't get affected.
So this phone can turn down background noise. Cool, eh? It's the same principle that happens with noise cancelling headphones, and it's a technique I've used in the studio to check the phase settings of mics (e.g. recording a drum kit).
It's strange that this technology has not been effectively recruited up until now. I'd say that's a far more vital feature than many of the apps you get on other smartphones...
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