At a glance, I’d say you’re right about the grass’s opacity changing when it interacts with a player. It looks like various flared cones stacked on top of one another, and placed in clusters to form the volume. It also looks like each clump has some kind of camera offset when it interacts with a player? The gif is pretty quick so it’s hard to tell, but it looks like any grass clump that’s between the camera and player renders out the whole clump in front, with the tops still fading like the rest.
As for the character interaction, I think the grass has a volume around it that triggers something in the character material when it’s origin point enters the volume. You can get someone huge like Orn just barely touching the edge of the grass and be invisible with parts of him actually sticking out into lane.
we do the same atm and we are using stencil buffer system. Works like a charm. Even if only a small part like arms, finger etc are in there, are these parts the only affected from the transperant material. So end of the story, you do not even need a programmer for that. The masked part is most likely just a sphere.