I'm not quite sure what this is, and I've only seen and heard Robert Fripp (King Crimson, Guitar Craft) doing it. It looks like he's rapidly strumming chords on the top three strings, but how in the hell does he get that sound? I read somewhere it's based off a banjo technique. How do you do this?

Since I don't really know how to describe it, here's a video and audio clip:

It's messy audio and video, but you can basically see it.

No video but the audio is much cleaner.
he is just rapidly strumming chords...sounds like there is some sort of effect on it.maybe a whammy pedal or something. Not really got time at the moment to analyze what hes doing.
He is just strumming fast. For achieving this easier its suggested to use thin picks.
Fender Telecaster Thin Line

(For playing fusion as a solo project)
Ernie Ball VP Jr
Vox Wah
Korg DT-10 Tuner
Ibanez TS9 Tube Screamer
Mxr Phase 90
Electro Harmonix Small Clone
Boss DD6 Digital Delay