What
Dotfonter creates a TTF font from a dot matrix description.
How
Written in Lua.
Uses TTX as an intermediate language since it is an XML dialect that provides broad coverage of TrueType features through the TTX tool that can compile a TTF from a TTX description, and vice-versa.
Fonts will be described in several ways. Obvious candidates include hex dumps by rows (the format used by most LCD controller chips), and some sort of ASCII art flavored binary so that new characters can be edited in any source editor that can handle fixed-pitch text.
References
Story
See blog posts for the ongoing story of why this came about and how it works.