git filters (defined via gitattributes file) do same thing when interacting with the repo.
Such thing is already done by a few exising elisp modules, such as jka-compr.el for auto-compression-mode (opening/saving .gz and similar files as if they were plaintext), and epa.el for transparent gpg encryption.
While these modules do this The Right Way by adding "file-name-handler-alist" entry, googling for a small ad-hoc boilerplate, found quite a few examples that do it via hooks, which seem rather unreliable and with esp. bad failure modes wrt transparent encryption.
So, in the interest of providing right-er boilerplate for the task (and because I tend to like elisp) - here's fg_sec.el example (from mk-fg/emacs-setup) of how it can be implemented cleaner, in similar fashion to epa and jka-compr.
Code calls ghg -do when visiting/reading files (with contents piped to stdin) and ghg -eo (with stdin/stdout buffers) when writing stuff back.
Entry-point/hook there is "file-name-handler-alist", where regexp to match *.ghg gets added to call "ghg-io-handler" for every i/o operation (including path ops like "expand-file-name" or "file-exists-p" btw), with only "insert-file-contents" (read) and "write-region" (write) being overidden.
Unlike jka-compr though, no temporary files are used in this implementation, only temp buffers, and "insert-file-contents" doesn't put unauthenticated data into target buffer as it arrives, patiently waiting for subprocess to exit with success code first.
Fairly sure that this bit of elisp can be used for any kind of processing, by replacing "ghg" binary with anything else that can work as a pipe (stdin -> processing -> stdout), which opens quite a lot of possibilities.
For example, all JSON files can be edited as a pretty YAML version, without strict syntax and all the brackets of JSON, or the need to process/convert them purely in elisp's json-mode or something - just plug python -m pyaml and python -m json commands for these two i/o ops and it should work.
Suspect there's gotta be something that'd make such filters easier in MELPA already, but haven't been able to spot anything right away, maybe should put up a package there myself.