Being that a feistel network is a pseudorandom permutation, this fulfills the need (and in my opinion, even more elegantly than a LFSR). For even better performance you could use AES as the PRF, especially if users have AES-NI instructions available for acceleration. Then use a basic Feistel network for the PRP.
Wait... what? It took him 25 years! ;)
Relates well to Shannon's problem solving process' [1] "Step 2: Fill your 'mental matrix' with solutions to similar problems."
[1] http://www.businessinsider.com/engineer-claude-shannon-probl...
Just want to note that this approach (regardless of PRF) probably wouldn't have worked in 1991. Recomputing the cipher state at every pixel is probably ~10x slower than the single shift + xor in the iterative LFSR approach.
EDIT: I just randomly checked that 4 rounds of F = ((r * 31) ^ (r >> 3)) & 0xff provide more or less the same result. Multiplying for 31 is the same as shifting 5 bits on the left and subtracting the number again, so it's just 4 rounds of bit shifting and xor.
You run Feistel for each number 0->65535 (corresponding to the "stage" of the FizzleFade) and out comes the pixel to redden at that stage. Since it's a 16-bit number, some values will fall outside of 320x240 resolution, and you ignore those.
Thank you.
So you're basically using what's known as the Luby-Rackoff construction on a provable pseudorandom function to create a pseudorandom permutation. A pseudorandom function generates output that appears random but which can repeat, which is why it cannot be invertible, and is thus unsuitable as a block cipher (you need to be able to decrypt a ciphertext to a specific plaintext).
A pseudorandom function is used as the round function in the feistel network (in the diagram, that's denoted by the F in the middle). You seed the pseudorandom function with a key K. Because the Feistel network successively transforms L and R in each round (L0, R0, L1, R1 and so on), it can be proven that even when the PRF F generates an output that has already been used, the Feistel structure will transform that output differently than the last time it was used.
In other words, the function F is not itself invertible. Invertibility is provided by the surrounding Feistel structure, because if F was already a permutation you wouldn't need anything else. F is only required to generate pseudorandom output, and the Feistel structure's additional logic is what grants invertibility to it. This is the "magic" of the Luby-Rackoff construction, which allows you to take any PRF and transform it into a PRP.