The Californian music festival's organisers weren't the first to use this effect, the Gorillaz used the same technique at all of their live performance and Madonna even joined them on stage at the 2007 Grammy Awards.

This form of "hologram" goes back even further, it's a technique known as "Pepper's Ghost", which is commonly used in stage magic and named after John Henry Pepper who first performed the illusion in the 1862.

One of the most well known uses of Pepper's Ghost is Walt Disney World's famous Haunted Mansion ride, where guests see semi-transparent 3D images of ghosts roaming around the mansion.

In the case of the Haunted Mansion, the illusion is created using 3D animatronic models position below a piece of glass angled at 45 degrees, from the viewer's point of the view they see what's behind the glass as well as a reflection of the "ghost".

At Coachella things were a bit different, sadly there is no 3D Tupac so the effect was achieved by projecting stock footage at the screen, this meant that the hologram alongside Snoop was only a 2D image. Rather than using a glass screen, the modern day stage illusion uses a thin metallic mesh which is suspended at an angle in front of the stage.

Although R2D2 was able to project a standalone three dimensional hologram in Star Wars, there's no way to create a free standing hologram, all holographic techniques use either hidden screens or flat stereo-images.

This video is a bit lengthy but explains how the technique can be reproduced…