If I'm not mistaken what they are doing is loading a php file that gets the mp4 location from the source site (ie xvideos or something) and hotlinks directly to that. I've had people ask us about doing this. This works great, right up until someone blocks your server's ip (or your hosts entire ip block) when it's making 50k requests for video pages a day - it's the server making the request for the video page and not the user. I know some of the bigger tubes already block OVH network completely, and some sites throttle requests (so you get something else rather then the video page if you make too many requests too fast).
You're safer embedding videos using their player and maybe making a 'grid' of <div> containers floating overtop of the iframe that go somewhere onclick.