What currently happens when you drag two fingers on a touchpad is that the X server intercepts those touches and sends mouse wheel events to applications. The semantics of a mouse wheel event are roughly “move down/up three lines”. This is jerky and not very pleasant. There has been no way of doing pixel perfect scrolling.
With the recent work on X multitouch and the uTouch gesture stack, smoothness has now become possible. Witness pixel accurate scrolling in Chromium in this Youtube video.
The remaining jerkiness in the video is mainly caused by Chromium redrawing its window contents from scratch whenever the viewport is moved.
The code is available in Chromium’s code review site.