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Motion Tracking and Real Time Video Effect

Hi all,
Firstly, I am sorry for sending this message again,I sent it yesterday to the ‘Patching’ forum.

I want to visualize a similar pixelation effect of this video http://www.vimeo.com/4723697 with motion tracking.

My camera will be capturing the street. The movements of people will be pixelated. The size of pixels will also change according to the data comes from distance sensor. Beside the pixel effect, some text and other vectors will be visible on the screen. It will be projected on a display outside.
How is it possible to be achieved?
Which tracking method would be proper for this aim? How can I create this pixel effect like a mask on video?

Thanks in advanced,
Best,