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From what I can tell, he adjust movement speed depending on how far his arm is away from his body.  As to the speed of movement with barely any lag thats probably because he is only tracking the one hand, not even the whole arm.  Not having to track the whole body is less data over the USB thus less calculations ect. 

If you think about how he has worked this out, you can see the opportunites open up for Kinect in core games if you do not have to track the full body.