HP Research is working on ways to enable DJs to scratch and mix digital music.

The HP DJammer has three programmable buttons that can be set for specific features: DJs can hold a track (just like they hold vinyl on a turntable), and a built-in motion sensor monitors the DJs hand movement. Moving the hand, and the DJammer will scratch the track at the point the music is held.
Over wi-fi several DJammers can also be used collaboratively.
The Playlist iPod DJ Party site has an interview with HP research on the DJammer. For iPod people living in London the next Playlist Club is on February 26th at North London's Progress Bar. See also HP Labs' DJammer Research page.