Quote from Bumber
Yes, I was aware of that mod. I doubt such a thing would be implemented into vanilla unless it could be shown to work okay on older systems (after Minecraft's code is more properly optimized we can see if that's the case.)
The transitions look almost too smooth to be using the default light system. I would guess that it uses some kind of custom rendering code to display the light effect, then updates the actual light levels (for use in mob spawning, etc.) far less frequently (if at all.)
No, the dynamic lights have no effect on mob spawning. The guy says it somewhere in the thread.