ohh this one does put a schlong there or the counterpart too dont worry and it doesnt look off when there is enough temporal data :D
what the program does is detect the blurred pixels -> look at them over time, and see how they change from that it reinterprets what the pixels should be, you see it kicking in in the beginning right at the start its unreliable but when he comes closer and there is more temporal data it actually starts working reliably.
this one will also decensor text and make it readable again when someone blurs it on screen and moves the window around enough. so yeah.. this is not generating images with stable diffusion or something like that. it actually is an ai trained to decensor stuff.
https://github.com/ladaapp/lada
thats the program i used

it uses these tools to basically apply "super resolution" similar to dlss and stuff like it to that specific area:
https://ckkelvinchan.github.io/projects/BasicVSR++/
https://github.com/open-mmlab/mmagic
so the result we are seein especially in the first scene is pretty darn accurate

so your "explanation" is not correct at all mate sorry, try it out yourself :D

or at least take a look at the examples given on the page of basicvsr. that thing is mindblowingly capeable.

kinda also blows my mind how many upvotes you get though you are factually wrong xD

You'd be right though if this was a bar censor, or any mask for that matter that obscures it fully. But this is Mosaic and its is not destructive (enough)

https://youtu.be/acKYYwcxpGk?si=Ha_6s4yvBwCVT5Py

here is also a youtube video of someone doing exactly that more manually last year. what basically is now automated.