Canon introduced a few new creative shooting modes in 2010. This is Miniature Effect, which blurs the top and bottom of the frame and boosts contrast and color saturation to make subjects look like painted miniature models. It works to some degree, but is not as convincing as true tilt-shift photography, which is what the effect is based on.
The top photo was taken in Miniature Effect mode, while the bottom is taken in the camera's Auto mode. All that is happening is a blur applied to both the top and bottom of the frame and colors are saturated to give the appearance of being painted miniatures. The problem is, the effect just isn't convincing enough.