The application is aptly called TiltShift. It costs $2, and while it doesn't use traditional tilt-shift lenses, the software adds some blur filters to create the illusion. The user selects the part of the image to be in focus/tiny, and the software feathers the surrounding area appropriately.

We're not sure that TiltShift's simple, even if effective filters are worth $2 to us, but the free clone app that's surely just days away will be a fantastic way to kill 10 minutes. [TiltShift via Wired]