If you pay attention carefully, the Z-ordering is preserved (a character up in the air is still drawn above characters that simply have lower, further back Y). The two shadows are taken from the current system graphic.
At the very end of the video, if you pay attention to the lower right, you can see a couple of characters land atop each other. They can stand on top of each other.
You can disable gravity and they'll never come back down, or disable friction and they'll keep going until they hit solid blocks or people.