Paper Dreams was produced by Kenneth Onulak as a Junior Degree Project while he was a student at Rhode Island School of Design. There was an actual piece of paper involved: a photograph of a sheet of paper in a frame was the starting point for the images in the video. Everything else was done on a computer, though a similar film could have been made by making thousands of paper cuts and photographing them. I’m guessing that the digital process was faster.
If you click on the Vimeo link at the right hand end of the control bar below the video you can read Onulak’s description of his processes.
Perhaps you will make some paper cuts this weekend, or only dream about them.