From the Store description (it states that Denim is needed, but it'll work on any captured 1080p and above video, on the supported phones, it seems):
With Lumia Moments you can extract great action shots from your videos or 4K Moment shots on your Lumia (or full HD shots on the Lumia 830).
Use Best Frame to find pictures and save them as Living Images, then see them brought to life in the camera roll or Lumia Storyteller. Action Shot lets you add a strobe effect to show action or add blur to emphasise motion.
Lumia Moments is available for Lumia 830, Lumia 930, Lumia Icon and Lumia 1520 as part of the Lumia Denim update.
The idea is simple enough, pick a supported high resolution video and then frame grab as needed using a streamlined interface (or indeed composite multi-frame action shots). Here's Lumia Moments on my 830:
The end result was indeed 2MP images, as expected (i.e. much more than simple screenshots, which is often how other OS and devices implement frame grabbing). On the 930 and 1520, 4K video will result in full 8MP images, which is pretty impressive.
In terms of performance, loading up the video in the first place on the 830 took around ten seconds, I'd imagine similar performance for 4K video on the 930 etc. While this might seem on the slow side, remember that frame grabbing from MP4 video is extremely complex because of the way individual frames are built up from parts of the previous master frame and then incremental changes - so there's a LOT of calculation going on.
Results are good, though obviously it's all tuned for use with Lumia Camera 5, which I don't have on any of my devices at the time of writing (Friday evening), I'll put up more examples in due course.
In the meantime, grab Lumia Moments from the Windows Phone Store, have a play if your device/OS version is compatible and please report back.