The Vocaloid characters are of cult status with millions of followers. No idea how many characters there are, 12 or something. That green haired one, Miku, is by far the most popular, they even wanted to name a train after 'her' in japan. Creepy just doesn't quite cover it, lol.
The Vocaloids are purely synthetic singing engines with phonetic libraries made from real singers. Much like AT&T's Natural Voice collection does for spoken words, Vocaloid does for singing. You can buy the software and use the libraries to get them to sing to whatever you want. Since they use a phonetic library, you can get them to sing in any language as the phonetics allows. Works like any other sampling engine, you just control the syllable, pitch and tempo instead.
As for the live demonstration, it certainly court my eye when i first saw it. It's about a year old now. I can easily see this being used for many live events for the growing number of virtual characters being created. But the problem probably lies in the projector synchronising and calibrating the software for depth, distance, etc for each character, not to mention viewing angle of the audience could have a serious impact since if you move too far to one side, you'll loose the illusion (so not much different from current 3D display tech).