It's called "Screentendo". It's a desktop application built by Aaron Randall, and it allows you to turn a selection of the screen to something similar to a playable level of Super Mario Bros.
Fun idea! There's a meaty description with graphs and video (and the source code) on the creator's blog describing how it works.
When Screentendo is launched, a semi-transparent window appears which can be moved and resized over other application windows. After placing the Screentendo window over an area of the screen, clicking inside the window will cause the app to render a game level based on the content beneath it.
Here's a short clip showing it in action on Google's front page: