I didn't know, but was intrigued (SAHM/ slightly frustrated early years teacher!).
A quick google suggests that your dd is using 'read write inc' stuff by Ruth Miskin for literacy.
The link I found is here on the Reading Reform Forum (scroll down to the bit in smaller text).
It basically suggests that 'Fred' (presumably a puppet/toy??) can only speak in single pure sounds, so helps the children learn how to break words into separate sounds, and blend them back together. 'Fred fingers', I think, are a way of saying a word out loud, then counting the single sounds you can hear on your fingers before having a go at writing the word. It says... 'The children learn to write words by saying the sounds and graphemes. Children sound out each syllable in Fred Talk as they touch their Fred fingers.
It all sounds like good thorough phonics teaching, but I'd still go in and ask the teacher to explain it to you - I'm actually surprised that the school haven't sent a letter or had a meeting to talk through and explain their methods with the parents. Seems a bit silly not to really. HTH
Ds 6 uses this they sound out the word in sounds on their fingers rather than traditional phonics. Our school did a parents information eve re read, write ink and this method has help DD11 with her spelling. I really wished it had been around for her as struggles with spellings. We really like this scheme.