The $u$ he is referring to is $1+x^2$, not $\sqrt{1+x^2}$.
I prefer the following explanation for ``$u$-substitution'' (which avoids any $u$'s at all):
The basic method for finding an antiderivative is to recall a corresponding derivative rule:
if you know a basic derivative rule, then you know a basic antiderivative rule.
Here, we regard a function arising from an application of the chain rule as a ``basic derivative''.
Given one of these, it is easy to find its antiderivative so long as you recognize that it is a derivative resulting from using the chain rule.
What expressions result from applying the chain rule? Well, they have the form of a product of a composition of functions with the derivative of the inner function of the composition.
For example, for the integral
$$
\int 2x\cos(x^2)\,dx,
$$
the required antiderivative is $\sin x^2+C$. Why? Well, you just need to see it; which you would if you've mastered differentiation and the use of the chain rule (my apologies if this sounds condencending, I didn't mean for it to).
For the integral you give above $\int 2x\sqrt{1+x^2}\,dx$, you should recognize that
${- 2\over3}(1+x^2)^{3/2}+C$ would work.
With $u$ substitution you're thinking "the integral
$$\int2x\sqrt{1+x^2}\,dx$$
is the same as the integral $$\int \sqrt u \,du$$
as long as $u$ is replaced by $1+x^2$ after evaluating the latter integral"
This $u$-substitution business is just a way of keeping track of things (which you'll eventually see after practicing with the method), especially when the integrand is the product of a composition of functions with a function that is ''almost'' the derivative of the inner function of the composition.
I hope this helps. I could elaborate on the last paragraph if you think that would help further.