can someone explain what the hecks going on here. defies marios laws of physics

sure...

This mod is basically a puzzle made for all of the people trying to make the super-fast Mario videos and such. SMB had... a lot of bug in it. (in fact, a lot of games of that era did) This enabled stuff like a 1-frame time where you could jump off walls and such, ways to glitch-through objects, etc.

A list of such tricks can be found here, with fairly detailed explanations of them all. Most of them require exact-frame timing to exploit, so tools (emulators with freeze-frame, save-state, etc) are used.

"air" is basically impossible to actually play by hand - the constant glitches you need to just move though the first level are insane. Even with an emulator, though, just figuring out how to get through one area is really hard.

The creator of the video has some release notes for his original submission that describe some of the specific tricks and glitches that were needed. Basically all are possible in the original SMB, though "air" was modded to also allow infinite jumps. That basically doesn't help, the puzzles are so insane...

what i love is the necessity to get all 100 coins to gain the free live that is needed because at the end - for some glitch i can't imagine, you have to die

dying at the end is one of the few things in the game that's not a glitch, actually!

The room bowser is in is the half-way point in the level, so when you die, it starts you right there instead of the beginning of the level. When you start after a death, though, you always start at the "ground" height, which is a helpful little tunnel under the boss!