The "Level 7 interrupt" is also known as the NMI, or "Non-Maskable Interrupt". It is the highest priority interrupt, nothing can interfere with it. On the 68K range, there are several interrupt lines, which have a priority. A level 3 interrupt can be interrupted by a level 4 interrupt for example.
Grounding the NMI line with a switch causes the 68K processor to jump to the NMI exception vector. Normally, this would give you a nice GURU alert, but software can patch into the NMI vector and be jumped to when it is triggered, like Hrtmon.
As it is non-maskable, there is not a lot that demos can do to stop it. It is a hardware mechanism completely seperate from the OS.
