Not a fever dream, I remember this, too. You basically got a “transparent” image through which you could see the rendered live (or game, as it happened with those, too). As soon as you closed the video player/game, or saved and reloaded the image, the effect was gone and you were stuck with a… I think it was just a black image?
I think it just remapped the memory of the video process, but I could be way off…
Back then, there was less hardware acceleration for the regular desktop stuff. Probably it just copied the data from the software rendering, and there it just defined that this part of the screen was hardware accelerated and this region pointed to vram instead of regular RAM.