1. I am not super familiar with the space (I am not responsible for this specific product) so I may not answer your question exactly. The discovery product is an interactive tool more than a static tool generating hypothesis. It lets you search, navigate, visualize, query in natural language the literature and the extracted entities/relationships.
It uses a lot of pretty advanced tech to do that:
* State-of-the-art statistical annotators
* Some deep domain knowledge understanding of the entities themselves (e.g., how chemical entities are composed)
* Some nifty visualizations
* Many component from the Jeopardy stack (you can read the Jeopardy papers for more insights) - deep question parsing, candidate generation techniques, scorers, etc.
* Down the line it'll integrate more reasoning techniques along the lines of http://www.research.ibm.com/cognitive-computing/watson/watso...
2. Our first version was focused on life sciences and intelligence, we are expanding it to finance, law, and education.