Let’s say Alice hires Bob for 20 hours for some website design work, Alice pays Bob on an hourly basis, and Alice pays Bob $40 per hour. Alice can now open a payment channel with Bob and deposit $4020 = $800 into an escrow account. Every hour, Alice signs a transaction that enables Bob to get $40 once he signs the transaction. After 15 hours of work, Alice finds that Bob is not delivering results as expected. Hence Alice does not sign any more transactions. Bob finds that Alice is not signing any more transactions, hence he signs the last transaction which is the one after 15 hours and keeps $4015 = $600. Gas costs are paid only for the last transaction.
This provides the parties with major advantages:
Payments can occur every hour without paying gas fees every time. Payments can occur through any ERC20 Token or a combination of ERC20 Tokens and Ether.
Dispute resolution can occur through the payment channel as it would only involve a party not signing the transaction.
Micro payments for hourly work, music streaming, video streaming can all occur entirely through these payment channels.
The payment channel app created by WandX is currently on the Ropsten testnet — https://ropsten.etherscan.io/address/0xbcaaa486b1491d0bd6548a79a59efdf2bf9a0e54.