I think I can enlighten you, having said video editing skills. It was faked. Rather, all of the Super Mario Brothers imagery was inserted onto a recording of a pan shot of the wall in a video editing program such as Final Cut Pro.

There's several reasons I think it's faked, but the most obvious to me is the shot itself. If you look at the wall it is really, really bright out. Sun light is about 6840000000000000000000000000 lumens. With a quick search on Google, the highest lumen rated projector I could find topped out at 10000 lumens. So, even if Earth only receives a tenth of the sun's total output, that still dwarfs 10000 lumens. Add this to the fact that, if it were indeed projected, the person shooting this would have needed at least 20 of these super projectors synced together, and, well, like I said, it was faked.

However, it's still impressive. It would appear that they recorded not just their run, but a run through the entire game's maps (well, at least those areas which the player passed through), and then pieced them together, removing Mario from each frame. Video it typically 30 frames per second, so, if this was by hand, that's 30 images to edit for every second of recorded material. Then they had to lay it out together, place it into the video and keep it still in relation to the wall in the video (and, again, if this is by hand that's 30 images to edit per second) and finally edit the player's run into those pieced together maps, taking out the map on that run so only Mario shows.

Now, granted, there's certainly some tricks they could have pulled. They could have made two identical shots of the pass by the wall, laying out a green screen material for one pass to make playing the SMB imagery in later easier (though it looks like a hand held shot, which would make getting an identical shot difficult). And I can't discount the possibility that they hacked their SMB game, extracting the maps off of it and possiblily even getting a recording the player's run without the background.

So, that's my educated guess.

TL:DR: It's faked. It's a damn impressive fake that certainly took some time, but a fake none the less.

Why would you assume the effect was done with projectors? It's an After Effects project. He just recorded his game run, and supered it onto the footage. You can tell he timed it out with tracking to match the timing of the pre-recorded game. There is an F'up around 2:30 when he enters the pipe where he's trying to cover up his tracking marks (most likely tape). Some places he's manually added animations where the video could not like the fireballs. He probably just added the game sprites in to match what the video was doing. Regardless it's all based on his pre-recorded speed run so of course it's fake.