This drafting technique has many names: worsted drafting, short-draw, inchworm.... It's simple and straightforward, as this video demonstrates. With high-quality combed wool (which this is not!), drafting this way makes a smooth, dense yarn.
This technique is great for other combed fibres, too, maximizing the sheen of silk, Tencel, or bamboo, and making sure that that alpaca you want to use as warp will be firm and nep-free.
The fibre used here is a low-grade wool. It was combed, but still contains a few tiny knots and neps. All the same -- it makes a dandy, smooth yarn when drafted this way.
Take a look, then try it yourself!