Yes - it is completely real.
Octopuses, squid and cuttlefish (the last two are called 'sotong' here...) belong to the family called Cephalapods which is a sub class of molluscs. They are unique in many ways, one of which is that their skin contains millions of tiny melanin (pigment) sacs called chromatophores which are surrounded by little rings of muscle. The animal can contract and expand these muscles at will, showing different mixtures of colour - kind of like the Red, Green, Blue pixels that you have on a TV or monitor. By varying these it can change colour. Some of these species are so skilled that they can show half their body in a mating display (pulsating multi-coloured rainbow effects) while from the other side they appear camouflaged from any predator against the background. On top of this, octopuses can raises and lower erector muscles in the skin and change the shape and texture of its surface. In that video you see the octopus causing his skin to raise many small ridges so that it resembles the flora behind it.
Of course, none of this has anything to do with music, but they are fascinating creatures. 8)