Photoplethysmography (PPG) devices are widely used in clinical practice but the origin of PPG signal is still under debating. The classical theory assumes that the PPG waveform stems from variations of blood volume in pulsating arteries. In this research we analysed high-speed video recordings of capillaries in a fingernail bed. It was found that speed of erythrocytes in capillaries has pronounced modulation in time, which follows variations of instantaneous blood pressure in arteries. However, the mean speed significantly differs even for neighbour capillaries whereas change of the speed occurs in phase for the most of capillaries. Moreover, the light intensity remitted from the papillary dermis is also modulated at the heartbeat frequency displaying significant correlation with waveforms of the RBC speed. Obtained results can hardly be explained by the classical theory of PPG signal formation. Shallow penetrating visible light acquires modulation of erythrocytes density in the capillary bed without interacting with deeper situated pulsating arteries. Therefore, the capillary bed could serve as a distributed sensor for monitor the status of deep vessels. Better understanding of the photoplethysmography basis will result in a wider range of applications of this fast growing technology in both medical and research practice.