Yes, the feed dogs move sideways. Machine makes some very interesting noises too! It's a pretty small increment, so some times it would move 2-3 times before making the next stitch.
I was doing decorative stitches that are programed into the machine, so it was neat to be able to do them wider than the needle opening in the foot. I had to go slow as for most of them, I was moving over a seam (along the edge for a crazy quilt). But overall, it worked very nice. I would change the speed setting so I could hold the foot all the way down and get a consistent slow speed with no effort on my part.
I have the Babylock Destiny.
I'm pretty sure my older Pfaff does this too, as it has 9mm built in stitches, I assumed I'd need the hoop for them, so never even tried using one. I bought that machine used and never figured out much more than basic stitching. DH has it now.