Hey, I believe the method is called the ‘Ghost Fluid Method (GFM)’. I learned about this method from Robert Bridson’s Fluid Notes Document. There is a brief description of the method starting at page 55 in section 6.4 Surface Tension.
The full document that describes all details of this method can be found in this paper: A Boundary Condition Capturing Method for Multiphase Incompressible Flow.
I agree that writing and learning about fluid simulation can be very time consuming! I started learning/writing this fluid simulator by following the ‘Fluid Notes Document’ and later on in a textbook called ‘Fluid Simulation for Computer Graphics’.
Recently I learned about the ‘Fluid Engine Development’ book from your Jet Fluids addon. This book looks very helpful and I recently ordered this to learn more about different fluid simulation techniques!