I was appliqueing all of this just to cover a 1/2" hole in the back of this garment.
This is a way of sewing over applique pieces that DO NOT RAVEL. If I was doing this on cotton, I would be satin-stitching and totally covering the edges of the applique. I don't do that free-motion either. If you didn't mind a little raveling, however, you could do it this way. You could even use a straight stitch instead of zig-zag.
The "paper" underneath is a very soft paper-like material that also completely washes away in water. I say in the video that it doesn't wash away, but it does. I have another product that is called wash-away, but it only gets softer in water. I don't know the name of this one, but it is REALLY nice!
Very hard to photograph red-on-red. Hope you get the idea.