There are an ungodly number of ways to go about a gore system, but targeting your video specifically.
It seems that each part of the body is just a separate mesh all rigged together and following one bone structure. This isn’t really all that uncommon and is a rather normal way of doing such a thing.
The head just has several layers of “destruction” and after the npc dies, they swap every time he is shot in the head until the final one has been reached.
I didn’t watch all of the video, but all I saw the arms and legs do was pop off which would support my theory even more.
If the arms/legs take enough damage, then break them off their attachment.
As for the blood, its just decals applied to the skeletal mesh. “Last I read,” UE4 doesn’t currently support this. It probably wouldn’t be too hard to implement though if you can figure out the math behind it.
However, you might wish to look at: http://www.valvesoftware.com/publications/2010/gdc2010_vlachos_l4d2wounds.pdf
which is a really good start for a gore system/dynamic wound system.