This is "Rose Ball," a practice mode "game" in Street Fighter IV. Both participants are playing with minimal health and just two moves - "Soul Spark" and block - to volley the energy ball.
Explains the blog Infovore:
Both players are handicapped so they have a pixel of health, and both have selected Rose as their character. They are playing best of 9. At the beginning of each round, one of them "serves" by performing Rose's "Soul Spark" move - a half-circle towards on the joystick, and a punch button. Then, they take it in turns to perform her "Soul Reflect", which can reverse projectiles; this is a quarter-cirlce away on the stick, with a punch button. Whoever fails to time the parry correctly will get hit by the "ball", and the other player will win the round.
Infovore goes on to sing the praises of "consensual gaming" (which sounds dirtier than it is), when participants agree to abide by a set of rules that the game itself can't enforce. I've played many variants of Madden this way. What kinds of "consensual games" have you played with other, er, consenting adults?
Rose Ball, and Consensual Play [Infovore]