Upon getting our hands on the S1000pj, the question foremost in our minds changed from "why?" to "how?" iFixit.com answer that question in the time-honoured manner of taking the thing to pieces.
AboutProjectors shows off a diagram of how the components fit together. The key is an L-shaped projector unit, wrapped around the lens system. Like all cameras that don't have a lens which pops out, the S1000pj uses folded optics. In other words, the lens is turned sideways and zooms in an out thanks to an intricate system of mirrors, rather like a periscope.
Our review of the Nikon Coolpix S1000pj is now live here at CNET UK. We thought... well, you'll just have to read the review.