That's quite awesome. Good find!
(The vid wasn't playing for me either 'till I hit the play button a few times and kinda jump started it!)
Here's another crazy video that demonstrates some of the OpenCobalt projects power.
http://www.youtube.com/watch?v=_luwx3HdtbQ (Check out some of the related videos too)
I don't think this tech is browser based (well their own browser i guess), but the "worlds" are supposed to be peer2peer online(able)-ish...! I don't understand exactly what they're up to, but it looks darn cool.
Link to the OpenCobalt site:
http://www.duke.edu/~julian/Cobalt/Home.html