According to the Lensbabies Web site, inventor Craig Strong started the company in an effort to create a digital equivalent for his trusty Holga film camera. Now, in the lens' third iteration, he has created something infinitely more useful and, in my opinion, more fun than a Holga, and more akin to a tilt-shift lens. Rather accurately, Strong calls the Lensbaby a "selective focus" SLR lens. In practice this means that by moving the front lens element, which is mounted on a plastic bellows, you can blur portions of the image while keeping another area in focus.
The system's concept has remained the same since the first Lensbaby, now called the Original Lensbaby, which does not have a locking mechanism or a focus ring; both the focus and the selective focus effect are controlled by moving the front element on the bellows. Its second generation, aka the Lensbaby 2.0, offers higher-grade optical elements and extends the maximum aperture to f/2.0, compared to the original's maximum aperture of f/2.8. Both the original and the Lensbaby 2.0 offer aperture discs to let you stop the lens down to f/2.8, f/4, f/5.6, or f/8. However, the Lensbaby 2.0's aperture discs are easier to use because they rest atop magnetic points instead of being held in place by rubber gaskets, as are the original's.