The emulator basically takes the sprites and attempts to figure out what they'd look like in 3D. This works with some games more than others. Contra and Dr. Mario look great, but Super Mario Bros 3 and Mega Man are a bit rough. But the possibilities here are exciting!
If you have Firefox handy, play around with it here: http://tructv.bitbucket.org/3dnes/

I was just coming here to write about this! This looks rad. I hope it continues to be improved!
This is awesome!