tl;dr:
00xxxxxx - copy (x+1)-th last EXPLICITLY ENCODED pixel (i.e. ignoring repeats)
010xxxxx - repeat the last pixel x+1 times
011xxxxx xxxxxxxx - repeat the last pixel x+33 times
10rrggbb - copy the last pixel and adjust RGB by (r-1, g-1, b-1)
110rrrrr ggggbbbb - copy the last pixel and adjust RGB by (r-15, g-7, b-7)
1110rrrr rgggggbb bbbaaaaa
- copy the last pixel and adjust RGBA by (r-15, g-15, b-15, a-15)
1111RGBA [rrrrrrrr] [gggggggg] [bbbbbbbb] [aaaaaaaa]
- copy the last pixel and replace RGBA if each bit flag is set
So it is essentially the PNG filter limited by Sub, but offers better delta coding and a larger history window. My guess is that it might not work well if the image has a strong vertical gradient (which would need the vertical context), but nevertheless it's pretty impressive that this simple coding is not as inefficient at all.