The physics apparatus works similarly, but instead of sampling a person's blood (via their finger), the LEDs measure the light absorbed by two different liquids. First, the experiment calls for a green LED to be shone through a small, clear container filled with a chemical indicator called bromothymol blue. The bromothymol blue represents oxygenated hemoglobin.
A voltmeter or multimeter measures the change in intensity of the light. Then, another liquid, an acid solution representing deoxygenated hemoglobin, is measured. The bromothymol blue should absorb more of the green light than the acid solution. The test is repeated for both liquids using a red LED. The experiment mimics how a pulse oximeter measures the oxygen saturation in a person's blood.
From the photo, I can see why someone might mistaken it for a homemade explosive device. So kids, let this be a lesson. Before you bring some physics items with you onto a plane, look at it. I mean, REALLY LOOK AT IT! You could cause a lot of grief to other people.