@rasterman A similar technique is used to render weapons in 1st person, so it never clips with anything the player gets close to.
Though these days it's not a 2D projection, but a proper 3D render that's just layered on top of the image rendered by the main camera.
That way all the dynamic lights work as expected.
It feels a bit wrong when you get close to something, as the illusion of depth gets broken, so more serious devs will animate the character moving the weapon out of the way to prevent this.