I did some testing on this, apparently it’s just like it looks, you need to catch the enemy back turned and you need to pretty much always do the same type of jump with a pretty strict timing (naturally I couldn’t keep it anywhere close to an infinite).
I personally wouldn’t call this a bug, but the original video was titled as such.
As stated, this was created and originally uploaded by nico nico user 国足天願
Title : KOFXIII 紅丸 永久
Source : http://www.nicovideo.jp/watch/sm20149984
Description : テスト