Given these facts:
A: Wood elves can hide when they are lightly obscured by natural phenomena, such as a shrub.
B: Lightfoot halflings can hide behind creatures on size category larger than they are.
Can a lightfoot halfling hide behind a wood elf who is hiding behind a bush?
YMMV It will depend if the DM determine if the hidden elf stills obscure the halfling or not.
Personally I'd say no, Insvisible things shouldn't obscure. i.e if the shrub is invisible, the elf shouldn't be abe to hide in it having no obscurement whatsoever. Likewise if the elf is invisible, the halfling shouldn't be abe to hide behind it having no obscurement whatsoever.
Haha. Sounds very true to life and perfectly legal, rules wise.
The elf isn't invisible, it's hiding. He is still reflecting light like every other visible object in the world. He is still blocking view of the objects behind him. He is simply doing so very quietly, and likely moving very little and only very slowly. (As a person who has spent a fair amount of time creeping around in the woods, I can state from experience that hiding nearly in plain view is pretty easy, if your clothing and movements don't attract the eye.)
Since the elf is very much a solid visible object, a halfling could absolutely benefit from the visual cover the elf is providing.
I agree that hidden does not mean invisible, in this case it just means "obscured and unnoticed," for both the Halfling and the Wood Elf- The Wood Elf is obscured by natural phenomena and the Hafling is obscured by the Wood Elf.
It follows all the rules, and I'd be inclined to allow it thematically, as the Halfling is small enough to hide behind his ally (hence the racial ability), and the Elf is tricky or magical enough to blend in with his or her surroundings. Imagine a person in camoflauge totally standing in front of a smaller person wearing a bright orange jacket. As long as the smaller person stays behind the camo person correctly (because he's naturally good at hiding behind people, perhaps), the camofluage benefits both of them.
I meant unseen, hidden make you unseen, and the halfling can hide when obscured by an ally, which i'd say is not the case here, simply because what you can't see shouldn't obscure things behind IMO for the element to procure some level of obscurement, you need to see it as it must obstruct your view 
Plaguescarred wrote:
Exactly. I've had both people and animals look right at me, with the people actively looking for me, and not see me because I was very still and wearing camouflaged clothing.
Had there been a little 3' tall man hiding right behind me, would he have been visible simply because the viewer didn't recognize my silhouette as human? Of course not. I would've blocked line of sight to him. The viewer would've seen neither of us.
If we apply your (Plaguescarred's) interpretation of this rule, then Little Man could only hide behind me if I had been seen. The fact that I was effectively concealed somehow allows the viewer to look through me and see Little Man? That makes no sense.
Sorxores wrote:
Plaguescarred wrote:
If you can see a creature, its not hidden or unseen, you can see it and know its location : )
Its not that hidden makes you transparent so much that creature don't prevent you from seeing past them. A creature might occupy a 5 ft space, yet it isn't a 5 ft wide, according to Space (PHB pg. 191)
For exemple, a lightly obscuring shrub doesn't block vision as its not heavily obscured, so an elf that is hiding in it would be noticed if you can't see through the shrub anymore no ?
I don't think you're being confrontational no worries, i think we just have different views on this. Like i said originally, it's up to DM, i expect to see different opinions on this matter as its not necessarily clear. I'll ask the dev see what they think as i find its an interesting question...
Its an interesting video, which treat on not seeing something seeable due to distraction, which is a bit how i envison Naturally Stealthy to work in play.
If the basket player (say there was only one) was not seen because its hidden, would you have spotted the moonwalking bear? Its basically a similar question where debating here with a shrub in between 
Nah, it's more of a question of:
If someone was hiding behind the bear, would you spot them?
Yunru wrote:
Plaguescarred wrote:
I think it would be hilarious if this scenario happens and two enemies each spot one, but not the other.
Moopsie: Hey, Gragnuk, what's that halfling doing over there?
Gragnuk: That's not a halfling, that's a wood elf!
Moopsie: No, it's definitely a halfling. He's really little and is dressed like a burglar.
Gragnuk: If you think five foot tall is little you're a moron. Plus "he" is a she and she's obviously a ranger.
Halfling and Wood Elf: COMBINED SNEAK ATTACK MANEUVER DELTA!
That's not the sort of surprise discovery you want to make.
I have to agree with everybody else on this one. Common sense dictates the hafling would be hidden (providing perception checks are failed). He's hiding behind an individual who, themselves, is hiding. If, at night, I'm crouched in the shadows dressed in all black and you can't see me and a three year old kid is crouched behind me, how can you see the kid? And, even if you could see me, there's still a chance you're going to overlook the crouched kid.
Shrunk halfling hiding behind a halfing hiding behind a enlarged halfing hiding behind a enlarged woodelf hiding behind shrubbery.
mellored wrote:
Is that a spear or a trident? :P
It is known that the armies of the Halfling-Elven Alliance travel in file to conceal their numbers. True story.