Apple tends to ask for a video of the app in use if it’s not clear how the app operates. Common causes are that the app is not written in English (so the reviewers can’t read the app instructions), is tied to a site that requires login, or makes use of specific hardware. In these cases, the app reviewers can’t easily verify correct operation of the app and would like a video showing common use so they can repeat the steps and verify the app.
My understanding is that a YouTube video will suffice.
There are some options (including free or trial software) for recording your app here:
http://forums.toucharcade.com/showthread.php?t=670
Good luck!
Mike