They have sensors on each kite and the ability to move it out of the way of incoming aircraft, from memory the arms can move. The kite loops in big circles on the video. It seems a combination of the looping circular swoops of the kite (it is NOT "still") and the movement of the actual "carousell" arms have modelled a system that can use the prevailing winds.
The prevailing direction of the winds should only push sailboats in one direction, but we use the force of the water to tak in another. It seems that they have an integrated sensor and computer swooping movement software system and arms directional system that uses the swooping motion of the kite to redirect it in what
eventually becomes a full 360 degree pulling motion around the entire merry-go-round. This is not like flying your regular childhood kit limited to a 50 to 100 meter string. This beast is 1km up, and they use that length to angle the kite in the correct direction.
I guess the only way for someone to "get it" is to look at the Flash movie. They have a kite pulling from a central point in great swooping motions that eventually lead the kite in a full circle using a combination of the higher and lower winds. This has already been tested with their proprietary software from the back of a truck. Check out their movie here.
http://sequoiaonline.com/blogs/ARCHIVIOscelti/kite.swf
I admit that I want this thing to work. But I also admit some skepticism and want to see it
built and working as well.

However, I don't like the implication that this very basic objection has not been considered. From their English home page.
$this->bbcode_second_pass_quote('', ' ')The Project allows to imagine wind machines whose dimensions are not conditioned by structural and dynamical limits.
The KiteGen can compete with conventional electric production systems, including nuclear, both in terms of single plant power production and produced energy cost.
The objective of the Project is to develop, implement and test a completely new concept for electric energy production.
The energy source for the project is the high altitude wind of the troposphere.
The method of channelling this source makes use of arrays of large tethered kites whose movements are controlled electronically, by highly sophisticated sensors and proprietary software.
The kites are anchored to a revolving structure on a vertical axis, analogous to a giant merry-go-round, which conveys the energy thus generated to the alternators and turbines of a classical power-plant, incorporated within the structure itself.
The present project is the object of six years of previous research and development and five European patents.
The work needed to demonstrate the validity of the hypothesis and construct the actual prototypes is articulated in phases for a length of five years.
http://www.sequoiaonline.com/blogs/htm/progetto_eng.htm