When a block is hit it will change it's type. From say stone to dirt. This happens as a complete change, so texture and block properties are changed.

video can be seen here: http://www.youtube.com/watch?v=OJTOn9o92SQ

can be recreated buy new world large biomes
Seed -19422913972

at Coords

X: -446.41718
Z: -222.61514
y: 63