Disney has a long and popular history of combining live action with animation, and the beloved 1977 adventure "Pete's Dragon" is just one step on the path that winds all the way back to its early days in the 1920s and a series of shorts about a girl named Alice who interacts with a bunch of animated characters.
The technology used on "Pete's Dragon" was called sodium-screen -- similar to the more widely known blue-screen -- and featured the actors performing alone, with Elliott and occasionally the backgrounds being added afterwards.
A documentary short included as a special feature in the 2009 DVD reissue of the film explains the process of making Pete "ride" Elliott. The feature shows the actor (12-year-old Sean Marshall) simply sitting on pedestals, supported by a crew member who would have been off-camera.
The feature gives a lot of the credit to Disney's longtime technical-effects guru, Ub Iwerks. Iwerks developed the live-action/animation technique for Disney in his role as animator of those early "Alice" shorts in the 1920s.
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