Yeah, you just stay the hell out of my porn folder, AdventureOS; I'm not interested in a boss battle with Peter North. OK, that's not actually how AdventureOS works.
The files themselves don't actually come (heh heh) to life, the game uses a folder to create a room in a castle and stock it with loot, NPCs or enemies. Multiples of a single file type mean larger or more powerful loot, NPCs or enemies. A folder represents a door to another part of the castle. The video (above) explains how the directory builds out the castle.
AdventureOS is a novel concept, even if it describes itself by a term I despise -- "Metroidvania". That of course means a platforming game that has role-playing elements and a persistent inventory for carrying weapons, spells, and what have you, where gaining access to new areas depends on acquiring special abilities. The game is under development by Eveland Games, which has opened an Indiegogo campaign to fund it. A release for Windows, Mac and Linux is planned.