I am intrigued by this notion and have been contemplating its feasibility.
Apparently this is the latest project from Luis Von Ahn, the creator of Recaptcha. Like all of his work, it’s based on a sort of symbiotic Mechanical Turk principle which, if nothing else, sounds awesome in theory.
I’m not exactly an expert on language learning. Many denizens of the internet seem to have favourite methods that they will defend to the death, but I suspect it depends at least partially on how a person is wired. On the one hand, Duolingo seems to work by direct translation, which might be slower than association with pictures or concepts, and it seems to lack an oral component. On the other hand, by drawing material from the web, it immerses the user in a reasonably useful set of vocabulary and grammar and then forces them to learn by trial-and-error.
Ultimately, very few learning tools stand well on their own. By itself, Duolingo would be woefully incomplete; but, if done right, it might constitute a fun resource in a larger toolset.