Scott O. Moore, in a review of the DVD "Worldspirit" by Alex Grey, describes the basic mechanics behind video feedback installations, the results from one of which is featured on the disc and excerpted on video above:
I knew a crazy prankster years ago who had a video feedback rig set up in his living room. He had a projection screen, a projector in a mount, and a video camera rigged up underneath the projector, so that the image that the camera was delivering to the projector was the same image that the projector was projecting - that's the feedback loop. But this prankster had built a mechanized rig for the camera that allowed us to utilize a remote control to move the camera forward and backward on a track, tilt it up and down, and spin it clockwise and counterclockwise. A separate remote allowed us to manipulate the projector's color and tint settings. With these two remotes, you could essentially explore waves of video feedback for hours upon hours. And when people chose to stand in front of the screen and interact with it, their own images would cycle into the feedback and if the camera rotated properly, you could see mirror images of these dancers, or upside down dancers interacting with their right side up counterparts. It was magic.