It is similar to having two polarizing filters and rotating one. Alternately, look at an LCD monitor or LCD TV through the lens of a pair of polarized sunglasses, then start to rotate the lens - same principle. You could also look at the screen with a camera's polarizing filter. (An LCD screen has a polarized filter. When the liquid crystals line-up in a certain orientation to the filter, they block the light, causing the image you see on your LCD. This works with any LCD display, even watches.)
I bought a cheap variable ND filter to tape on the front of a pinhole camera I made from a cigarillo box, wanting long exposures. I first put it on my 35mm while pointing at a flat light source, rotated the lens, and watched the in-camera meter. This way I was able to get an _approximate_ idea of how much light-reduction I had at each marking on the filter-ring.
Seeing that I'm new to pinhole cameras, I can't really comment on how well it worked. It gave me what I wanted, though. I have used it on my 35mm a few times and it seemed okay, but I'm not the best photographer, so what is acceptable to me may not be to others.
Those others can tell you if a variable ND filter will degrade your photos compared to a "static" ND filter.