A system and process for generating, and then rendering and displaying, an interactive viewpoint video in which a user can watch a dynamic scene while manipulating (freezing, slowing down, or reversing) time and changing the viewpoint at will. In general, the interactive viewpoint video is generated using a small number of cameras to capture multiple video streams. A multi-view 3D reconstruction and matting technique is employed to create a layered representation of the video frames that enables both efficient compression and interactive playback of the captured dynamic scene, while at the same time allowing for real-time rendering.