Good thing those banana peels are virtual, huh?
As noted on Hack A Day, there's a Xtion motion sensing camera and a video projector hanging from the ceiling, which track the Romos. The room is scanned and then a course is generated based on the objects in the room.
The projection mapped game has Mario Kart-style items like banana peels, and there are also power-ups. Kawamoto says there are plans to release the source code "when we find the time."
Your Living Room Becomes Next Mario Kart Course [Hack A Day Thanks, Bakamoichigei!]