Many teams would carry a core "operating system" (really a library of system routines/process scheduler/IO/audits) from game to game and build off of that. That left more time to write the game mechanics and choreography.
The team switched from digitized actors to motion capture technology (the quote is incorrectly referring to Midway as Acclaim): "To make the characters in video games more realistic, actors are being recruited to serve as models. Acclaim, the video-game company that made Mortal Kombat, has created a special 'motion capture studio' for this purpose. A martial-arts expert with as many as 100 electronic sensors taped to his body sends precise readings to a camera as he goes through his moves—running, jumping, kicking, punching. The action is captured, digitized and synthesized into a 'naked' wire-frame model stored in a computer. Those models can then be 'dressed' with clothing, facial expressions and other characteristics by means of a computer technique called texture mapping.
There were other 2D fighting games around that time that used video capture (remember Atari Pit Fighter?) but MK avoided the sprite scaling and kept it flat.