I suspect they are just dynamically destroying stuff. Since it’s really just a 2D game, this is pretty easy. The meshes for the background and the platforms are procedural anyway… so if you know you need to chop it off, the math is already there. You had a line from a → b explosion happens between them at c, so now you have lines a->c and c->b with scorched ends.
It’s a really fun game, though. One of the best examples I’ve played of using 3D to render a 2D side-scroller.