Heh. I messed around with the "tilt-shift" effect quite a bit a year or two ago, making real photographs look like pictures of models. I never thought about applying it to paintings, though. That's pretty trippy.
Edit:
Actually, what he's doing here is mostly just false DOF (depth-of-field) in general, rather than the tilt-shift effect in particular. Tilt-shifting really screws with your sense of scale. For instance, this is not a model:
The idea is fairly simple:
1) The further away an object is from the camera, the less saturated it will appear due to atmospheric dust, etc. Artificial tilt-shift first messes with your mind by oversaturating the image a bit. This makes your brain think that the objects are closer to the camera than they really are.
2) Due to the nature of optics, you can't focus on a very wide range when you're looking at objects close to the camera/your eye. For instance, place your hand 6 to 8 inches above your keyboard and focus on your hand. Note that your keyboard is blurry and out of focus. Yet, if someone else holds their hand 6 to 8 inches in front of your keyboard while you look at it from 10 feet away, you have no trouble focusing on both simultaneously. So the tilt-shift affect also messes with your head by making only a very narrow range of depth in the image be in-focus. Anything in front of or behind that depth becomes out of focus very quickly. This mimics the optics of up-close photography.
Long before the days of photoshop, etc. you could buy a special "tilt-shift" filter for your camera that would accomplish the same effect.