Sorry for the delay, Dennis - yesterday here was a holiday. Couldn't see the movie either: apparently my QuickTime needs some refreshing. However a trivial example should clarify:
Let's imagine (in 2D for simplicity) a rectangular frame surrounding a lattice of selected vertices. Now drag the top right corner in some direction and see each vertex move along with the pointer - the nearer to the pointer, the closer the vertex follows it. A line would stay a line, a circle would expand into an ellypse, a square would turn into a kite. In Photoshop you find this feature under edit->transform -> distort, and I guess that adapting it to a 3D model should be peanuts (well, nearly...).
When you're fed up with me, just say so