It looks like it's using a projected texture set to additive (rather than subtractive). It doesn't actually give off light, but any model surfaces that are encompassed by the projected texture will have the texture added to them, making them look like they're glowing. It's similar to the cave lightbeam effects.
One downside to combining projected texture effects with other effects (beams, particles, etc) is that although the latter will scale with the creature they're applied to, horizontal offsets set into the projected texture effects don't scale. So a beam that meets up with the projected texture on the ground may work perfectly when applied to a human, but will probably undershoot it when applied to a gnome, and overshoot it when applied to a half-orc. The cave lightbeam effects avoid that by having the projected texture directly underneath the lightbeam haze (so there's no horizontal offset).