It's much simpler than the description might suggest: all that counts is movement up and down. The higher the position, the higher the frequency. So, you have your target, with its tone, and the phone, with its tone. Get them to match, and you've found the bug.
As it stands, there's not really enough to make this a full game - a good, quick technology demo, but there's nothing more to it at the moment. Just get the tones to match, every time, and you clear the level after however many bugs there are to find.