2d light like Super Nintendo Days...faking it.

I was curious how one would approach a level where they want all the lights out. But the player could use a weapon or something to turn on lights or have the weapon projectile light the way. I would like this NOT using point lights as I have to add a diffuse sprite material and do some other mucking. I remember in the olden days games would do this or something similar all the time. I even saw demos in XNA do this. I think the process was like using a black material and grayscaling it to white and you could do some blend magic to get it to reveal whats under the black and have it black everywhere else. Is this true? What is this called? Examples of doing this in Unity?

Ideally I would like a lighting system that works JUST like this awesome game:

http://gamejolt.com/games/roguelight/31467


If I really wanted to not fake the light I would use Sprite DLight:

https://www.kickstarter.com/projects/2dee/sprite-dlight-instant-normal-maps-for-2d-graphics

But I couldn't get this demo working for my animated character in Unity it also slightly reduced the effectiveness of my pixel art.

 

That lighting and normal map effect (sprite dlight) can be setup in Unity without any additional stuff.
Several tutorials on youtube -
Here is one -