I think this has to be an engine modification. One reason I wanted it was it would allow cloaking devices and such.
This could be done with shaders i believe when/if they come out and can be made as addons.
The animation is basically the simulation of the simulation that is Blockland. made in Blender.
And again, the frame is there just so you can tell where the "brick" is.
Although it would be cool if it was transparent rather than invisible on the side you can see through