It is SNP based. They are using the Illumina OmniExpress Genotyping Beadchip. That only tests SNPs, not STRs. Illumina reported a large amount of income from this in an investors' call and, later, Ken Chahine was quoted in a GenomeWeb story as confirming it (finally, after I asked him and wrote about my theory that they were using this chip many times) and then discussed their usage of that chip with me over the phone.
It is the same off-the-shelf chip that FTDNA and 23andMe uses. As is, it tests just over 733k SNPs. 23andMe has added over 250,000 custom SNPS, so they look at just under 1 million markers (SNPs), while FTDNA and AncestryDNA both have said that they test 700,000 markers (SNPs). Neither company appears to have customized it yet, although Ken told me that AncestryDNA is working on hand-selecting new Ancestry Informative Markers for the future.
I wrote about the chip with links to the technical info on it here: http://www.yourgeneticgenealogist.com/2011/02/ftdnas-family-...