The idea here is to generate a shader which generates an unlimited area similar to a given texture. So you put in grass, water, rock, dirt, etc. textures, and you get an auto-generated shader which makes unlimited non-repeating areas of them.
This is called exemplar-based texture synthesis, and was first done about 20 years ago. See this paper:
Here's an overview of systems in more recent years. This seems to have been a hot topic from the late 1990s until about a decade ago.
Conceptually, this is a lot like Adobe Photoshop's Content Aware Fill. Here's how that works: https://gfx.cs.princeton.edu/pubs/Barnes_2009_PAR/patchmatch.pdf
You can think of it as generating an output image by merging small samples from various areas of the input image. What's it's doing isn't really that complicated. If you were doing this in a shader, you'd have a starter image and some procedural mechanism to composite a pattern of small clips from that image. The hard part is figuring out the reassembly plan. Executing the plan isn't that tough.
So, has this technology ever made it to game background textures?

