How can I treat a WebRTC Video Stream(coming from the smartphone) as a Virtual Webcam? Do I have to make a desktop application that will act as a driver and will basically act as a stream receiver and will add the application as a webcam to the Operating system list? Thank you
Yes, that's exactly the way.
One existing implementation is Unreal WebRTC DirectShow Source Filter: http://www.umediaserver.net/components/index.html It requires a server software running and receiving WebRTC stream; then WebRTC DirectShow Source Filter connects to such server from any Windows machine, receives that stream and exposes it to that machine as a/v capture device.
It may be easier to deliver your WebRTC stream to ffmpeg, and then go from there: Use WebRTC/GetUserMedia stream as input for FFMPEG