i was going to post the same video, not only zomboid uses that system, Diablo II and Fallout tactics does.
There are a little tutorial showing how to do it
(sorry for my english, not my native languaje)
Sadly this wouldn't really work because we have to use the sprite generator that is specific for our engine. It's a pain in the ass, but we've got a workflow for it sorted now (basically we pay a guy in Indonesia to do the back-breaking labour for us).
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