This video shows that the control is at the end effector of the arm. The force/impedance controller is running in the right arm and does not resist movement that does not move the end effector. The standard controller, running in the left arm, maintains each joint angle.
In this video, the PR2 first moves its gripper to the center of its body and then tries to extend the gripper about 25 cm farther away, but with low stiffness in the x direction (towards/away from the robot). Since the stiffness is low, it is easy for a human to move the hand away from the center of the body in the x direction and it returns slowly. In the y and z directions, however, where the stiffness is set to the maximum, it takes a lot of strength to displace the gripper and it returns very quickly to its set point.
However, in this video, the PR2 first moves its gripper to the center of its body and then applies a constant force in the x direction (towards/away from the robot). As you can see, the force is light so the human can easily stop the motion. However, with no intervention, the robot hand will continue to move as far in the x direction as it can go. There is no sense of trying to achieve a goal in this direction. This type of control is useful if you wish to exert a constant force against something.