From what I see, I think he's sending the picture over in a straight bitmap. He mentions that decoding is not done topleft to bottomright, his looping code (on the PC, done in PHP in the code he posted) takes care of that. He's just using a serial connection, I think.. The Arduino is then displaying that bitmap on the LED grid. 24x16=384pixels. One pixel per bit, so that's only 48 bytes for the full image, probably passed as just a stream of CHAR or BYTE values, 48 bytes long. Serial handles that even at slow speeds.
Pretty good framerate.. now you need a way to produce the PNGs downconverted from uncompressed AVI frames... so that on one side you just feed in a video file and on the arduino, the best approximation is mapped on the LED matrix..