It does work. However the foam he is using must be very stiff because in my experience it is much easier to use frozen foam.
What I mean by this is that when you are trying to place a hole in the foam it collapses under pressure. If you get the sponge wet first and freeze it for roughly a half hour to an hour it will then be stiff enough to poke a hole in. I also prefer to use a drill bit for this but you can use a knife or whatever.
This is commonly used in breeding tanks with air stones for lift..
Another use for this is the prefilter for and Under gravel Jet System using a Powerhead. I wrote a How To on the UGJ found here.