What they are doing is simply grabbing frames from DSLR video; a short 1-2 second video recording with manual focus shifting from one subject to the other, and just saving a number of frames ripped out of that short video clip.
On the other hand, it does look like they're interpolating between discrete frames. In their fourth example (http://lytro.com/gallery/content/lytro_50_00090.php), take a look at the piece of confetti to the top left of the middle head when the focus slider is about 1/3 of the way up from the bottom. It has a sharp edge, but there's also a halo around it from a frame where it's out of focus.
