Yes, Super T's explanation is right.

Each contract is for $10 (that's how it works if we want to account contracts in bitcoins). When you deposit your bitcoins to ICBIT you just move your long position in bitcoins to our site. Now, you can use this money to either increase your long position by buying contracts - effectively this means you're opening a short position in US Dollar (dollar falls - you get more bitcoins). Or, you can "sell" your long position and move your funds into "virtual dollars" (which are same contracts, if you sell them) and buy them back when the BTC price falls.