The Wii-mote has a low-tech camera and an accelerometer in it. The camera picks up dots of light radiated from the sensor bar. The only issue you will have with a projector is using the wired sensor bar that comes with the Wii. The wire itself is only about 10 feet long, so if the Wii will be far away from your screen, get the wireless sensor bar from Nyko. It's well-designed, with a timer function so it shuts itself off, and is actually stronger than the original Wii sensor bar.
You can see a picture of it in action, in the last picture on this page:The Bunker DDR Room.