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Traditional tilt-shift photography uses a special lens (the technicalities of which I really don’t understand) which is often used to simulate miniature scenes.  Basically the lens creates a very shallow depth-of-field which is the effect you get when doing close-up photography of small models etc. 

I really like the effect, its quite intriguing but the hardware lenses are expensive. Fortunately there are many software applications which simulate the effect – basically by applying blur to an image apart from a small simulated focus area and giving a sense of depth-of-field.  The iPhone even has a few simple apps which have varied degrees of success, here is a little collection of photos I’ve played about with (taken with iPhone 3GS I hasten to add so the image quality is a bit ropey).