It blends 2 layers, offset by a fraction of a pixel in both directions (I'm using a fourth of a pixel, iirc). This alone can create "holes" in single-pixel details, especially in text, so it also jitters the 2 background layers so that they are still blended in the same way, but at slightly different offsets. In one frame, the first layer would be bottom-left from the centre and the other would be top-right. Next frame, one layer is top-left from the centre, and the other is bottom right. The current "filter B" is just "filter A" without the jittering, btw.
That might not be exactly what lameboy's doing, that's just what I think it's doing based on toggling layers in desmume. Nevertheless, the results are pretty good.