http://blogs.wdevs.com/tybon/articles/3074.aspx
http://www.ati.com/developer/ShaderX2_IntroductionToHLSL.pdf

found these - not sure how much they help. I am trying to get the basic theory here. When a model comes close enough to a projector, the projectors event is triggered, and the triggering entity has skills set to the projector position and orientation. This data is used in the shader to apply a texture to the model.

So the model would have to change it's material when it came within range of the projector, no?