Basically a camera is tracking the position of the object, and a projector is putting the image on the object.
[youtube=425,350]nhSR_6-Y5Kg[/youtube]
This shows the basics of how it works:
[youtube=425,350]XgrGjJUBF_I[/youtube]
And this shows the more advanced details (really neat stuff at the very end):
[youtube=425,350]liMcMmaewig[/youtube]