Dynamic image manipulation technology using "energy seams"
youtube.com
youtube.com
Also got some coverage on an Adobe blog which makes me think they want to duplicate this functionality as soon as possible. http://blogs.adobe.com/jnack/2007/08/holy_crapworthy.html
Here's a free version from the author himself:
Paper: http://www.faculty.idc.ac.il/arik/imret.pdf
Hi-rez video: http://www.faculty.idc.ac.il/arik/IMRet-All.mov
PS: This stuff is probably in the process of getting patented. Adobe will have to license it. Few years back Adobe got into a lot of trouble for "stealing" healing brush from one guy. He sued them and I think they settled.