Maybe I am confused. Is it simulating a lava lamp, or a video of a lava lamp?
But the means by which the network generates frames involves some kind of learned representation of the lava lamp that is more than just a matrix of pixel values, and the network encodes a function for how it predicts this representation will change over time. So it also simulates the lava lamp itself.
On the other hand, the network has no idea about things that would be necessary to perform a remotely accurately simulation, like properties of the chemicals involved or the laws of thermodynamics.
So it simulates really the "experience of a lava lamp".
But it still doesn't do it very well.
Don't get me wrong, it's a cool project, but let's not get ahead of ourselves.
It does need to understand certain properties of owls, even if "arrangement of pixels that look like an eye near arrangement of pixels that look like a beak" is as far as it gets. Though as in another thread it is not necessarily the owl (you would need to do something like rendering a la Neural Radiance Fields (NeRF) to get closer to some perfect comprehension of an owl.