We've actually featured a similar service once before, but TiltShift is a much better tool, offering more advanced features and more control. As Jason pointed out last time we talked about tilt-shift photography: "Tilt-shift lenses start at $1200'ish and only rise in cost from there. Most people won't be running out to buy a lens that expensive for a little hobbyist fun." So true. Moreover, tilt-shift photography isn't exclusively used for the miniature effect; you can transform photographs of any kind with TiltShift and get amazing results.
TiltShift works either on its web page (where it's Flash-based), or you can download TiltShift for free as an Adobe AIR application (meaning it'll run on Windows, Mac OS X, and Linux).