How do I play like this?

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Is this just arpeggios? I want to be able to pick out of a chord like this. Is there any certain thing I should practice or is it just Knowing what notes sounds good together.

Yup, it just picking arpeggios with your right hand, while keeping the same chord shape. He occasionally adds extra notes to chords, such as when he adds the sus4 to the D chord. Start off slowly, making sure you always pick a note in the direction of the next note:

  d d d u u u d u

E ------0---------|

B --------1-------|

G ----0---------0-|

D --2-------2-----|

A 3-----------3---|

E ----------------|

d is downstroke, u is upstroke. I have included an upstroke at the end so you can repeat the bar.