The video and program page[1] don't reveal anything about how this works. I remember watching a documentary a few years ago on Discovery channel where this project was discussed. The bullet was essentially divided into a front and back portion, which could twist independently. The twisting then allows for corrections in the air. There's another design by Sandia labs where the bullets has little "fins" (like a missile…
I would imagine this would be simple in test cases, but in the real world, what about a hostile target may differentiate it from a friendly ally that is nearby?