Mike is correct in how to get it to work, if you were curious how the science of it works, it's really simple. It works similar to capacitive touch works, what you are really doing is increasing the resistance. By getting closer or touching a surface it takes a longer time to get a reading, hence you can measure the time offset . However, unlike capacitive touch, here you are increasing the distance for the current to travel and in turn increasing the resistance. Also you are decreasing the size of the "wire" (or conductive rubber) so this might have an affect on the resistance too (not sure if measurable? someone can correct me if I'm wrong in this assumption)
check this out if you need an example of how to use it:
http://arduino.cc/playground/Main/CapacitiveSensor?from=Main.CapSense