First, although the device is called a 6 degree of freedom joystick, it is much, much more than that. Essentially, its a a set of coils inside a set of rare-earth magnets. The coils are attached to a bowl, called a flotor, which has a handle at its center. Coils in a magnetic field generate a Lorentz force when a current passes through them, levitating the bowl. You've now got a bowl, floating in a large air gap with no physical connection to anything except through some very fine wires at the base. The position of the bowl can be found using LED's on its outer surface which shine on some optics and sensors.
Most haptic devices use mechanical linkages to give force feedback. This always involves friction and backlash. The more degrees of freedom you want, the more motors you need, the more linkages, the worse the friction. This device has essentially zero friction, no backlash and can be moved to resolutions on the order of microns. It can follow a commanded sinusoid fast enough to play music. It can produce really stiff surfaces and stops so fast that the bowl reverberates. Most users think they're hitting something real or we're generating collision sounds but the device is actually just stopping so fast.
The linked video is indeed from 1998 and is of an early prototype. Better video is available even on YouTube and more about this project and others can be found at the Carnegie Mellon Robotics Institute website.
I should also point out that this device is intended for research, especially research involving small, precise motions, making it ideal for virtual surgical applications and anywhere where you might need fine motor control. As a gaming input/output its definitely cool but you'd need to be pretty well off to afford one right now.