[NP-INCOMPLETE]

We are both wrong, I went to their research site. The image of the background was previously rendered on a computer and then projected in infared onto the object, in this case the coat, from a separate projector in front of the person. The infared light hits the special retroflective material and radiates visible light, albeit with much lesser intensity. Thats why the background image is only projected onto the person's suit. Not real invisibility, since the suit cannot emanate its own light nor can it take images of the background in realtime.

[js1138]

This is essentially a Hollywood green screen.