Yarr, at best it seems more likely that he has made a simple MIDI controller(out of preexisting MIDI equipment, and using contact mics in the place of keys, basically in the same way that metal doods use them for triggers for Superior Drummer) and is using it to control a softsynth.
Even at that, such a controller would not allow the manipulation at 1:27, so it looks MOST likely that is is a video of the "not real life" variety.
As a way to get thousands of random people to listen to his other computer music on his site, it is relatively clever though.
