The original image is squashed vertically, so that you only compute half the pixels and then you stretch it back up. When you do this, you can't have the usual dither patters, so you end with something like this (unless you cheat shift every other line, like in Sonic 3D, but then you have dither patterns everywhere).
I think it's a similar technique to Sonic 3D's Intro FMV on the Genesis/Megadrive (https://www.youtube.com/watch?v=VTawyLNoRhU).
The original image is squashed vertically, so that you only compute half the pixels and then you stretch it back up. When you do this, you can't have the usual dither patters, so you end with something like this (unless you cheat shift every other line, like in Sonic 3D, but then you have dither patterns everywhere).