The idea of parameterized typefaces is an old one; I guess this example is interesting in that it attempts to parameterize between a serif and sanserif typeface.
Knuth's paper "The concept of a meta-font" (from 1981) has a nice example in which he typesets Psalm 23 ("The Lord is my shepherd ..."), changing the parameters of his font a little with every character. It's sans-serif at one end, serif at the other. (Among other things.) Regrettably, this demonstration doesn't seem to be available online. You can find it, e.g., in Hofstadter's "Metamagical Themas".
I found the passage in Hofstadter's Metamagical Themas on Google Books [1].
I thought this was fantastic. In that vid it looked like it might have been some new way to create fonts. I think that would be an interesting thing to research or develop. Something where you can, through mechanical devices "feel out" a new font. Or maybe one where you can record a new font similar to how you record an audio track. Hook up a keyboard and the typeface creates itself based on the audio spectrum you create. You could have fonts that are almost alive.
Looks like somebody hooked up METAFONT to some hardware controls... nifty UI hack, but, as JCL already said, far from new.
Re-invention beats invention everytime. I think Stewart Brand of Whole Earth Catalog fame said that.