From the outside it looks like an ordinary compass in a box. 

There are no lights or buttons, its just a rotating needle that gives you information back.

Behavior: 

If you open the lid, the needle starts rotating and indicates its searching for the other device.
When its done, its pointing in the direction of its partner. 

The inside , where the magic happens, is full of technology. 

It consist on a GPS Module, GSM Modem, a real magnetic compass, a gyro and a motor that steers the needle.

The thing is basically a GPS tracker, so I decided to use the cheap TK102 tracker.
It makes everything a lot easier to Prototype and play around.
The tracker offers GPS, a GSM Modem, a Battery and a Charger over USB.
It has two serial Ports to read the current position and to send / receive data over mobile network.
An arduinolike IC is doing the logic and calculations between the components, so you have unlimited possibilities to modify it and use it for your idea.
The needle position get calculated between the two geographical positions, the direction from the real compass, and to keep it fluent - the forces from the gyro.

In addidion, it could be possible to extend the system with an RF transreciever, like xbee. 
With multiple antennas on the outside of the case, the origin of the signal is can be measured by intensity of a signal on each antenna.
So the device is not more limited by the precision and availability of GPS and GSM. And it also can send data directly from device to device.

But step by step.

Alternatively you can use the device as standalone and extend the range of possibilities.
So, if you want to point on a geocoordinate, a connected object like a smartphone,
you can just send the information via APP, website or even SMS to the device.
You can nearly connect everything that knows its own location.

So it would be useable for classical geocaching treasurehunt, finding people in a large crowd, or just show direction of the Moon.

technical details will follow.

have a nice prize
and keep on hacking