From the Youtube video description

Just some friendly bumper pulling for bragging rights. I know the Chevy only appears to be in 2wd but the driver swears he was in 4wd. You can hear him talking about locking it in just before the pull. I asked him afterwards if he was sure his 4wd was fully locked in and he said it was.

The explanation to why only his rears were spinning was that when he lost traction and hopped his steering tie rods broke and both front tires were turned opposite of each other. Thus, all the power went to the rear as the fronts appeared to have traction. Had he never broke traction, hopped and broke his steering he should have easily pulled me.

2006 Touareg V10 TDI: 313HP, 553 lbft torque.
2008 Chevy 2500 HD Duramax Diesel: 365HP, 660 lbft torque