about the same idea as nipkow disk
nowadays when people don't want to go the rotating led bar way, which requires very high density led strips (hundreds of ~200-400 mil smd leds) and the accordingly complex control circuitry (basically an FPGA per bar + high speed bus, etc), they do nipkow disk but with individual leds instead of holes. this way you can get away with tens of leds while still having a reasonable sized picture and not that much bandwidth to drive it.
edit: another, less sophisticated take is for example
https://hackaday.io/project/191947-rotating-led-display/deta...
I mean if you squint hard enough, it's the same idea as a cathode ray tube. Each hole scans across the "screen" for the desired width, then the next hole down takes over, which does the same. Back in the day, you'd get an interrupt when the reset happened, and you could recalculate your sprite position before the next line got scanned.
Very cool seeing this implementation though. Congrats, OP!