Raycasting into scene geometry and gathering simple data to use 3d shading maths in the ICE tree.
A frustum-fitting camera-space grid of points is used as a basis for the scene rays.
Rays gather intersection points with scene geometry and generate shading state variables.
Shading state variables are used to colour particles with 3d shading maths.
Extra rays are cast for a shadow and ambient occlusion.
It's a bit like a renderer.
(The best stuff in the video happens from about 2:13)
Details at http://blog.ioxu.com/?p=572