The Polo is a nice, if somewhat boring, compact hatchback that is VW's Europe-only answer to the Ford Fiesta. It is also, however, the basis of VW's World Rally Car. That means that what you see here is indeed a stripped out, 300hp, AWD, Polo of doom.
The rumormill has been going on about a street-legal version of this car at some point, and also that the Polo might make its way to our shores. This video makes us really hope both of those things are true.