I'm pretty sure I actually picked up one or two to throw into my pile of components for future possible projects, but I haven't done anything with it yet. I'm not sure if I got the breakout version or the bare trackball, but if I just got the trackball itself then it apparently doesn't even come with the hall effect sensors, so I'd have a bit of work to do (and further component selection) to get it working. Looks like the breakout board version might be worth the extra bucks because they've done that bit for you (and even added the RGB leds).
From the product description, "a slight roll of the trackball creates multiple high/low transitions on the four axis pins, easily picked up by any microcontroller." Doesn't sound that you could just hook it to the direction controls of a gamepad but you could hook them to the inputs of a microcontroller like an arduino then have that output directional signals to the gamepad (for another $30 bucks or so of hardware). Hall effect sensors basically conduct current in the presence of a magnetic field and IIRC these trackballs have a tiny magnet on each side, and using the ball causes the little magnet to rotate. The sensors then react to this rotating magnetic field so what you get is four pulse trains whose frequency would indicate how fast the ball was turning in whichever direction.
Sounds like a bit of work to do what you want.