My son talked to Crush in 2005, and he still remembers it fondly. This was a brilliant idea by Disney, and the kids love it.
and yet... HOW DOES IT WORK?!
The kids sit on the floor in front of a big "water tank". One of the cast members if I remember correctly, has the kids call Crush and out he comes. There is a cast member off stage who can hear what the kids are saying and he answers their questions in the voice of Crush. It is an animated screen. Crush has a variety of moves and facial expressions.