Tiny Town was the creation of a man named Frank Moshinskie who worked on it for 68 years. The display depicts various places in America that Moshinskei visited. Over 20 states are represented. The tiny people were hand-carved by Moshinskeie. You get a brief look at the mechanism that powers it all -- also made from recycled objects -- around the 1:25 mark in the video posted above.
From an article on Tiny Town:
Frank wanted his Tiny Town to be busy, so 18 hidden motors power everything from the rivers to the oil pump jacks to the carousel and merry-go-round. Push-buttons at various spots allow visitors to make the tiny people move: people swim, swing, hammer and saw, rock in hammocks, hang up clothes. A family eats the same sandwiches they've been eating since 1963; the bread goes up and down to their mouths many times a minute.
The entire thing is made from found, recycled, and inexpensive objects. Nothing in Tiny Town cost more than $4.00. Items used include cat food cans, rotisserie motors, puzzle pieces, popsicle sticks, sawdust, record player parts, and anything else you can imagine.
You can still visit Tiny Town in Hot Springs, Arkansas where his son Charles has continued to display it as a tribute to his father's creativity.
Here is the full article on Tiny Town from RoadsideAmerica.com.
[ Thanks Tom! ]