Microsoft veteran Raymond Chen has answered a lingering Windows question: why did video screenshots keep playing in Paint?
According to Chen, the OS used green-screen overlays to fake video playback, utilizing a technique familiar to video production called chroma-keying.
The media player program didn't render the video pixels to the screen. Instead, it rendered video pixels to a graphics surface shared with the graphics card and told the graphics card that whenever a green pixel was written to the screen, a video pixel from the shared graphics surface should be written instead.
Chen explained that there are a few advantages to this approach, which was used due to the limited resources available to the OS at the time.
Author's summary: Old Windows used green-screen overlays to play video.