This scene is based upon a threshold and a channel copy node. With a threshold node you can map the incoming movie's pixels' luminance. Every pixel that is brighter than the value you've given in the parameter will be white, the darker ones will be black.
You can use the resulting image as the alpha channel of another one. If the channel copy's source channel set to any color and the destination to alpha, the destination image will have holes where the thershold's output is black.
The movie with the black background is used as a displacement map for the tiles. So the tiles will be distorted only where the hands are present. With a small amount of blurring the displacement looks more interesting as it adds gray shades to the edge of the white part.
With the channel copy we cut out the hands movie's black areas from the resulting image so it will be clearer that what's moving are actually hands. A small amount of blurring here gives the alpha channel some anti-aliasing effect due to the previously-mentioned gray shades.
In this scene we included a slider node so you can easly try what happens if the amount of blurring changes.