I guess the guy took the Mario code from the Mario AI Competition, and make a Live Wall Paper out of it !
On my FRF50 Froyo version, it is really smooth and hypnotic.
I just think it will waste my batterie (but actually, the wall paper is not executed that often : only when switching from one application to another, so I don't think it is that bad ).
Here is a video :
You can find it on the market with Android 2.2 ( search for "Mario Live Wallpaper" ), or from this Xda-developer forum.