This video shows how Carlos Vamos incorporated an Alesis AirFX into a specially designed guitar body. The AirFX is an effects unit that connects to any line-level sound source. You control the effects unit by moving you hand over the black circular bit ( which senses the movement of your hand within an invisible 3D sphere). You can move in any direction to modify the effect number of ways. OK, so you could do this with a foot pedal but where's the fun in that? http://www.youtube.com/watch?v=UOJTMsKR7ag
The unit requires a line level signal, so the guitar must have some sort of onboard preamp. Unfortunately it looks like the AirFX is a discontinued project. If you want to try this yourself you might have to hunt around to get one used.
Link: Carlos Vamos' website