The team's concept is known as Performance Improving Self Contained Exoskeleton for Swimming ("PISCES"). They have looked at various bio-inspired systems that are based on animal propulsion, and borrowed design features from dolphins, sea turtles and, yes, penguins. They can't turn you into Michael Phelps, but they can certainly make a big difference improve speed and endurance.
The lower body of the suit works like normal swim fins with a power boost. The upper body design mimics the movements of a penguin -which is not natural for humans. They're still working on the details. http://blog.wired.com/defense/2008/09/attack-of-the-u.html