Some information here

When a video is encoded, each frame is stored as an I frame or a P/B frame. An I frame [Sven Konig calls them ∆-frames] is like a JPEG image, it holds the still image (that frame) in its entirety. P and B frames are the smart frames that allow videos to be compressed. They store only the differences between the current frame and the last frame. The effect you see in the datamosh videos is what happens when you store only the differences between frames, ie. when there are no I-Frame references.

Basically, most frames in an AVI specify only how an image differs from the previous one. Every now and then, a keyframe is inserted that specifies the whole image and gets the AVI back into a known state. But if the keyframes are removed, it's just changes on top of changes on top of changes. So if I have an AVI where the background changes suddenly, then I remove the keyframes, and then I also drop the frame in which the background actually changes – the AVI won't register the background change at all. It'll just keep rendering the old background until something comes along and says "hey, this pixel has changed."