AFAIK the button doesn't actually move, it's like the home button on some older iPhones (like the 7). It detects the pressure and has a haptic feedback to make it feel like a button. If you look at a powered off iphone 7, the button is just an indent on the otherwise fixed glass panel.

Exactly. The most impressive part is that it really feels like a click, down to the illusion it's moving down (but it's not, at all). When powering off (or there's a crash), the feeling of it being immovable is surreal. Plus the surface is suddenly responding evenly (the clicking ones had a hinged design, so it became increasingly hard to click upwards the surface)

One can leverage the haptic feedback to make the TouchBar a bit more lively[0]. The illusion breaks a bit since the haptic device is farther away from the touch surface but it's still quite a transformative experience for the TB.

[0]: https://github.com/niw/HapticKey