It is artificial blurring, which is similar to portrait mode's artificial bokeh. It's not perfect, its actually pretty bad on moving subjects. Things like a soda can on the table or other objects with smooth edges tend to work better.
I know the live view of cinematic mode looks a lot worse than after you save the file (the phone post processes the video). You can test it by doing cinematic mode and focus back and forth between objects really fast, it will live preview the rack focusing quite fast between two objects. However, the final video you save will look nothing like the live view you just saw and the focus between the two objects will be a lot slower and smoother transition.
For your video sample, a lot of the scenes aren't really making use of the rack focusing but it does help with some fake bokeh to make it appear you have an expensive fast lens. I agree, most of the shots you had would have looked better in normal mode.