My previous answer was a hot mess.

The AW110 manual describes it thusly:

Record with optical compensation for camera shake during still picture shooting using the lens shift method, and under the following conditions, also performs electronic VR using image enhancement.

and then:

When electronic VR in On (hybrid) operates, saving the picture takes longer than normal, because when the picture is shot, the shutter is released twice automatically to perform picture compensation.

So, it is similar to the "dual" VR methods advertised in Nikon collateral, where two types of data are used to determine shake: optical VR and (probably) an accelerometer in the body. But it looks like it may sample and interpolate the image data twice so it can stop the action at slower shutter speeds. This may be why some people are saying it combines photos.

The utility must be quite constrained, though, because the manual has a laundry list of reasons why it will not take effect even if enabled.