[xerophtye]

From what i understand it uses the accelerometer to create a "bump signature" and matches the two devices according to that. The geo-location thing only helps filter that search and i think they introduced that part later on when they got a huge number of users across the globe.

Now what is note-worthy here is that the signatures wouldn't be "identical". They may not even be opposite as i think the idea is to bump your HANDS while holding them, so the hands may distort the vibrations. So the fact that they actually managed it to WORK is astounding.