Basically, it is a whole bunch of tiny micro cameras, only 1 pixel in size, next to a pixel. The camera takes the color it sees most of and transfers it to the pixel opposite it. Not sure how they did the block/ball, but thats how the jacket is done.
I'm pretty certain that jacket just works with pixel tracking and a digital projector, no fancy tiny cameras anywhere just one, that feeds an image to a computer, it works like a blue screen stage, there was an article in new scientist about this a while back.
Real invisibility is being worked on at the moment though, there are researchers who can make objects invisible by bending light around them, they cant do visible light yet, but it will only be a matter of time. I saw that Japanese one a while back, and to be honest I cant see any real combat application for it because all it is, is a guy with a white jacket getting the background projected onto him, it wouldn't work at night because it requires ambient contrast, so the soldier would look like a tv screen with a gun, not very invisible. Granted the military could have/develop some cool system involving rgb lasers with complex tracking software, "painting" dynamic camouflage on soldiers but, for troops it would be a bit pointless, as the lasers would have to be behind the advancing enemy for them to see the illusion and would have to have a clear line of sight to soldier that it was camouflaging. If you can put a laser behind the enemy, why not put soldiers there instead, shoot the baddies and take their flag? That being said, a friend of mines cousin, was on the team of researchers in Melbourne that "teleported" light from one point to another instantaneously, without it travelling. If somehow that light could be persuaded to contain colour information, perhaps a camouflage of sorts could be teleported onto a soldiers body. I doubt that will happen anytime soon though, there is a big difference between a single photon in a lab and billions of them on a battle field, trying to form a meaningful image.
Here's a little blurb about that project
Researchers from Tokyo University in Japan have developed an early prototype of adaptive camouflage. Their approach is simple: A video camera on the back of a white rain jacket collects an image that is projected onto the front of the jacket as if it were a movie screen. The jacket is made of a retroreflective material that clearly shows the projected image. Although casually glancing at the jacket reveals a ghostly image of whatever is behind it, this approach is little more than a parlor trick; it requires a separate projector and only works from front-on (see photo above, courtesy of Tachi Laboratory/Tokyo University).