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DreamScene is a tool that allows people to use videos and other optimized animations as desktop wallpapers. It is included in the Windows Ultimate Extras package and can be downloaded using the Windows Update service. At this time Microsoft released a Technical Preview version as the final product is not yet ready.
The good part about DreamScene is the fact that it uses your video card for display and not your processor so your PC will have enough resources available for performing other tasks. You can use any video as a wallpaper as long as it is saved in the ".wmv" or ".mpeg" format. Also, you can use DeskScapes - a free application that extends Windows DreamScene with the ability to run so called ".dream" animated wallpapers. ".dream" files can be looped videos, or dynamically generated in 3D, or change-based on a set of triggers.
Adding animated desktop wallpapers to your desktop using DreamScene is simple. Just follow the video below.
If, for some reason, you want to stop the desktop animation, right click on your desktop and select Pause DreamScene.
NOTE: Windows DreamScene is available only for Windows Vista Ultimate.