No, it would not be tapped into any server. He'd be using either wifi or bluetooth to communicate with a notebook or another PDA. Using WEP the communications would be encrypted so that no one would be able to read what they were saying to each other. If I had been in the audience with my PocketPC, I would have detected. While sitting a waiting I would have pulled my PocketPC out and checked out what wifi and bluetooth was active in the area. It's something I do if I ever have to wait somewhere. You never know when you're going to find an open WAP and be able to surf the web while waiting. Gotta get to FreeRepublic any chance I can get. I might have caught their network in my quick search.
From what I've seen I strongly doubt it was any kind of handheld device. It was either 5x7 note cards which were shuffled or regular letter size paper unfolded from quarters.