Here is another short excerpt from The Love Parade, a movie that's never been on VHS, DVD, or any format except a laserdisc box set issued just before the laserdisc died out completely.
The "Lubitsch Touch" (tm) is just as hard to define as "chemistry" (see below). But here's my take on it: Lubitsch specialized in getting the most mileage out of things that are not seen. This has very little to do with getting around the censors or saving money; even when something could be shown on the screen with no trouble, he'll try and find ways to do the scene without showing it. You know the old saying "Show, don't tell?" Lubitsch's motto might have been "Tell, don't show." He believed that what we don't see is funnier than what we do see, and because he was focused on character rather than gags, he believed in focusing our attention on the way people react to occurrences, rather than the occurrences themselves.
The example here is the scene in The Love Parade where Chevalier and MacDonald first have dinner together. It's a simple scene in outline: they meet, they talk, they have a drink, and they go into her boudoir together (this is 1929, pre-Code, so it's OK to have a woman invite a man into a room with a French name). But Lubitsch doesn't want to show us the scene: it would be too long, and nothing would happen in it that is of any interest; it's just the lead-up to their big scene together. But he can't start with that big scene, because he needs to set it up first, have them get really interested in each other. So the way he and his writers do the scene is to have three groups of supporting characters eavesdrop on Chevalier and MacDonald, and talk about what they're doing. MacDonald's cabinet ministers, MacDonald's ladies-in-waiting, and the servant supporting couple (Lupino Lane and Lillian Roth) all report different things and have their own reactions to what's going on. And the result is something much more entertaining, and about half as long, as Lubitsch would have gotten if he'd just shown us the action that's being described. Tell, don't show.